Written by Rick Ackerman, Rick’s Picks
Lately I’ve focused mainly on what T-Bond futures would need to do to get out of serious jeopardy. A rally to 147^27 would be a good start for the March contract. But suppose the next big move is down, not up.
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The new chart below shows that the June contract could fall all the way to 127^31 in search of a solid bottom. That would equate to a rate of 3.75% on the 30-year, currently trading around 3.13%. I cannot predict what the U.S. and global economies might look like if that were to occur, but it’s a pretty good bet that the housing and auto sectors would be in a deep funk.
Wouldn’t the implied recession bring rates back down? Indeed it would, although it might take an extremely steep plunge in economic output to cause this to occur.
For me, at least, the scariest thing of all is my very long-term target for interest rates on long-term Treasuries. I’ve projected 0.6% (!), but I would not deign to predict what the economy would look like at that point. Point-six percent on the Long Bond – and, correspondingly, zero-point-zero on the Ten-Year – are not so farfetched if you can imagine every investor on the planet taking cover and fleeing to ‘quality’ in the space of just a few weeks.
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