From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
We’ve been pounding the table about rising rates for over a month now.
It’s hard not to when they're rising across the curve in both the US and abroad. Cyclical and value-oriented assets have increased in tandem, as energy and financials have become leadership groups.
We continue to see countries with heavy exposure to financials emerging from multi-decade bases. Just last month, the Euro Stoxx 600 made new all-time closing highs, while Italian equities reached their highest levels in 13 years.
But when we look further out on the curve, the long end hasn’t been keeping pace with shorter duration yields in recent weeks.
Taking a look at the 30-year beside the 10- and 5-year yields tells this story best.
![](https://media-allstarcharts.s3.amazonaws.com/wp-content/uploads/2021/11/TYX-TNX-FVX.png)
As the 5- and 10-year continue to make higher highs and higher lows, the 30-year is falling back toward its lows from this summer.
The fact the long end of the curve hasn’t been rising along with shorter-duration rates is also made clear when we analyze 30-year yield spreads:
![](https://media-allstarcharts.s3.amazonaws.com/wp-content/uploads/2021/11/30ySpreads.png)
These spreads have been collapsing lower across the board since March. The 2s/30s has fallen almost 90 basis points from its peak nearly eight months ago.
This isn’t a major concern on its own as long as rates continue to rise across the curve. With that said, bulls want to see longer-duration yields keep pace, or at least trend higher.
We’ll be keeping an eye out in the coming weeks and months for any signs that the long end of the curve is coming under increasing pressure.
For now, this is just something we want to be aware of.
We’ll continue to monitor the bond market for critical developments. Make sure to stay connected for updates!
Thanks for reading. As always, let us know what you think.
And be sure to download this week’s Bond Report!
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