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Keep an Eye on the Long Bonds

I am keeping a keen eye on what is happening in the long bond market.   The chart which I pay particular attention to is the daily 30-Year Treasury Bond Price Index. The chart below shows that the index has dropped to its critical support level of 114-115. It shows a double top (first two red arrows), then break down to form a triple top (second set of red arrows). If the bond index breaks support next week, I don’t think it will be a pretty sight – a harbinger of dangerously higher interest rates. Such a scenario would trigger the real possibility of a double-dip recession. 

I believe at some point there will be just too much US debt to sell. If the US decides to monatize its debt, ie, run the printing presses to create money out of thin air, it would be highly inflationary. The new Obama health-care bill will likely add billions to the already ballooning federal debt.  There is even talk of lowering the credit rating US T-bonds -- a very bad thing for the US economy if it came to pass.

(click on chart to enlarge)