US Treasuries have been a one-way train for the past few months, and it looks like no one other than the Federal Reserve is willing to stand in front of it. China and Japan led an exodus this past June, dumping nearly $41 billion of their combined $2.35 trillion Treasury holdings, accounting for the largest net foreign decline on record (basically neutralizing the Feds bond buying for that month). And with the prospect of less stimulus dominating investors thinking, outflows are likely only going to get bigger. At what point does Bernanke begin to sweat?

TNXMomentum is a dangerous thing, especially when it occurs in a market that’s nearly twice as large as the US equity market (and that’s not even factoring in futures). Last week, the 10-Year Treasury broke and closed above a key technical level: its multi-year downtrend, which goes back to 2007! Clearly bond bulls have lost some faith in Bernanke. Whether the Federal Reserve tapers later this year or in early 2014, it’s obvious the bond market doesn’t care. Investors are set on front-running the inevitable.


10 yearUS Treasury yields have been in a 30-year bull market. Could the FOMC’s recent hawkish statements finally pop the very bubble they created? Stay tuned.

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