I explained in these articles that a twist of the yield curve from a grossly undervalued configuration to a fair valuation was in the way:
The orange yield curve is the recent lowest yield curve (on August, 25th).The green yield curve is the expected, almost normal, yield curve (on Sept 17th).
Recent Minimum Yield Curve and the Normal Yield Curve
(Image by Shalom Hamou) Permission Details DMCA
We had a splendid Hammer on August 25th on 10 Years US Treasury Notes:
Other Supporting Evidences:
I remind you that this Twist of the yield curve does not come from any macro economic reason but only as a dynamic return of the yield curve from a formidably undervalued configuration to its fairly valued configuration.
The Federal Reserve System will necessarily misinterpret that steepening of the yield curve:
The Yield Curve as a Leading Indicator
Forecasting Recessions: the Puzzle of the Enduring Power of the Yield Curve
Expect the upward trend of the yields long-term treasuries to continue and accelerate. For the Yields on 10 Years US Treasury Notes the objective is 3.500% [ 121 on December Futures on 10 Years US treasury Notes] on September 17th which means that we have already made 30 BIPs and we have still 75 to make in 8-9 days that makes an average increase of 9 BIPs.
As chasing rates will be less a necessity the spreads between corporate and government bonds (in perticular junk) will widen. Junk bonds, of course, will collapse with the crash.