Global selloff in bonds/China gets some early traction on apartment sales

The 4.30% level on the 10 yr Treasury yield is the key level to watch here, as we tick above 4.20% today, as it is the 50% retracement of the 5% yield peak last October and the 3.60% low two days before the Fed cut rates by 50 bps. I've expressed my belief many times that I wouldn't be surprised if long rates rose as the Fed cut short rates. Yields are jumping around the globe too even as some central banks outside of the US, ex Japan, are more dovish than the Fed. The Aussie 10 yr yield is higher by 16 bps to 4.43% (the RBA is not dovish btw), matching the highest level since May. The 40 yr JGB yield was up by 5 bps to 2.52% and approaching its May highs of 2.58%. Germany is mired in no growth, the ECB just cut for a 3^rd time and bund yields are up 15 bps in two days to the highest since early September. The Canadian 10 yr yield is higher by 11 bps ahead of expectations that the Bank of Canada will cut rates by 50 bps on Wednesday. 

The move higher in US short rates to 4.04-.05% is in spite of voting member Mary Daly saying yesterday, "So far, I haven't seen any information that would suggest we shouldn't continue to reduce the interest rate. This is a very tight interest rate for an economy that already is on a path to 2% inflation, and I don't want to see the labor market go further." I'll argue again, getting to the 2% path is one thing, staying there is another. 

Bottom line, we can point to a few reasons for the rise in global long rates but one possibility is that markets are giving a big thumbs down to central banks easing policy before we've seen a SUSTAINABLE drop in inflation. I reaffirm my belief that we're still in a bond bear market that after a 40 yr bull market doesn't end in just a few years. I remain bearish on the long end and bullish on the short end. With gold and silver up again today (though could be due for a rest at any time) in the face of the rise in yields, just maybe too they are the beneficiaries of the bond bear market rather than being threatened by a rise in bond yields. 

We'll of course see if the move up in long term rates continues but too many still assume that just because short rates fall, long rates have to do the same. Pulte Home is getting the reality check even though they said this in today's earnings release, "Years of underbuilding has created a structural shortage of homes and correspondingly high home prices, so the Federal Reserve's pivot to lowering interest rates provides a powerful tool in helping to address the affordability challenge faced by today's homebuyers." Bankrate said last night though that the average 30 yr mortgage rate is back above 7% at 7.04%, up 8 bps just yesterday. That's the highest since the end of July.