Taps Coogan – March 31st, 2022

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The following chart, from Crescat Capital’s Tavi Costa shows the 2-Year Treasury yield since the late 1970s (on log-scale).

As we’ve repeatedly noted, Treasury yields are yet to break their long term declining trend line despite all that’s happened in the last couple years – including the highest inflation in 40 years.

Nonetheless, we are now very close to a break out of that trend, as can be seen in the chart above. The story is similar for the 10-year, though a tiny bit of headroom remains.

If one thinks that the Fed is actually going to get through another 7+ rate hikes before inverting the yield curve, inducing a recession, and flipping to easing, then the great bond bull market is probably over. Otherwise, it’s probably time to brush on Dr. Lacy Hunt’s ‘long whimper.’ It’s make-or-break time.

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