“The Long Bull Market in Bonds is Over” “The Punchbowl is Being Removed”

The headlines have been “on hold” for years, but are now coming fast and furious as the 10 year yield hit 3.10%, the highest level since July 2011. Traders are shrugging off geopolitical events (US-North Korea tensions flaring up again, Mid-East tensions, Trade Talks) based on this week’s solid growth and inflation news: retail sales growth (Macy’s is back!), housing starts, and industrial production – all reports came in strong. Combined with supply/demand concerns (US deficit, Fed balance sheet reduction), yields are busting through key technical levels. The velocity of the rise is also noteworthy. Yesterday we saw a quick 9 bp increase in the 10 year rate. It’s seeming more like a trend than a peak, but those pronouncements have been made before, only to see yields drop as growth sputters or events such as Brexit spook investors back to the safe haven of Treasuries. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners