Treasury yields confirm bond bear market

10-Year Treasury yields respected their new support level at 3.00%, confirming a primary advance.

10-year Treasury Yield

Breakout above 3.00% also completes a double-bottom reversal, signaling the end of a three-decade-long secular bull market in bonds.

LT 10-year Treasury Yield

The yield differential between 10-year and 3-month Treasuries is declining but a flat yield curve does not warn of a recession. Only if the yield differential crosses below zero, with short-term yields rising faster than long-term, will there be a recession warning.

Real returns on long-term bonds — the gap between the green and blue lines below — remain near record lows.

1981 to 2018: 10-Year Treasury Yields and GDP Implicit Price Deflator

Only if the gap widens (real returns rise significantly) are we likely to see downward pressure on stock valuations, with falling price-earnings multiples.