10-Year Treasury yields respected their new support level at 3.00%, confirming a primary advance.
Breakout above 3.00% also completes a double-bottom reversal, signaling the end of a three-decade-long secular bull market in bonds.
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.
Only if the gap widens (real returns rise significantly) are we likely to see downward pressure on stock valuations, with falling price-earnings multiples.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.