Long-Term Treasury Bonds Are Making a Signal

The signal would be toward inflation.  This is crazy talk I know.  The Fed is going to get all austere and end QE.  Yes, it must be true; they said so in yesterday’s delayed expectations management exercise.

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This is a flipped over view of the Continuum AKA our monthly view of long-term interest rates.  Maybe the most recent red arrow on the chart will not result in an inflationary phase this time.  But then again, didn’t the Bond King think that it would be different ‘this time’ in spring, 2011? *

What if it is not different this time?  I give all due respect to Prechter because I happen to believe he is due respect.  Indeed, I think EWI are forecasting a top in T bonds as well.  So we must realize that there could be a scenario where T bonds top out and yet deflation ensues.  But if the Continuum is to continue, 2013 could turn out to feature obvious signs of inflationary excess before all is said and done.

* Bond King Bill Gross famously shorted the bond just before it began a huge rise in a flight to the safety (ha ha ha) to US T bonds. 

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