Thursday, January 7, 2010

What Could Be The Catalyst?

As the prior post implied, Treasury bonds are at one of those "critical" junctures. If they continue lower (i.e., yields head higher), it would seem to suggest improvement in the economy. If bonds find a bottom and reverse higher, which is entirely possible as well, then the economic outlook still remains a bit murky. Nonetheless, the old adage that the "technicals break with the news" may apply here.

According to this article over at ZeroHedge there is a good possibility of stronger than expected economic news with Friday's job report, and this could be the catalyst that finally catapults yields higher. It is well worth reading. I don't have an opinion either way but I did present my plan in the prior article.

How equities react is another matter entirely as they appear to be pricing in all sorts of good news. Good economic news may see yields increase but stocks decrease as market participants worry about the withdrawal of Fed stimulus and higher interest rates.

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