Rates on the Ten-Year Note broke out on Friday to a multiyear high at 4.81%, presumably on their way up to the 5.09% target shown in the chart. The good news is that that’s probably as high as they are likely to rise over the next few months. The bad news is that only a severe economic downturn could conceivably keep them from rising any further. The wild card would be a global outbreak of peace and good feelings amidst growing despair that Trump and Iran’s mullahs can come to terms. Hormuz should become less of a concern in any case, since ample quantities of oil appear to be getting to buyers despite Iran’s blockade. Also, it’s possible that the increasingly stringent economic sanctions will finally bring Iran around. ______ UPDATE (Sep 12): With nary a glimmer of hope for peace or lower energy prices, rates streaked toward the 5.09% target we’ve been using for quite some time. It ‘should’ show stopping power, but if not, that would be a menacing sign for inflation and oil consumers around the world. _______ UPDATE (Sep 19): A week of consolidation would seem to augur more than a mere push to the 5.09% target. We’ll soon find out, although I am at a loss to imagine what externality could put a lid on this potentially world-shaking rally. ‘World Peace’ breaking out hardly seems conceivable. _______ UPDATE (Sep 23, 3:54 p.m.): Today’s so-far slight overshoot of 5.09% is sufficient for us to switch to a 5.34% target as a new minimum, then 6.07% if needed. Worst case: 7.47%. Best hope for miraculous relief: 5.54%, a midpoint Hidden Pivot associated with that last target that should put up stubborn resistance. I’m not sure how this scenario would flow from MAGA’s being a dead duck come November and Trump’s being a very lame one. A troubling possibility is that oil prices are headed to the moon.
TNX.X – Ten-Year Note Rate (Last:5.11%)