Industrial Insight

Secular change in direction of interest rates indicates shift to capital reinvestment…. | January 4, 2011

http://online.barrons.com/article/SB50001424052970203793504576060093853662186.html?mod=BOL_hpp_dc

Up and Down Wall Street

| TUESDAY, JANUARY 4, 2011

Bond Market Surprise for 2011?

By RANDALL W. FORSYT

But a similar prediction of a sustained rising interest-rate cycle were made nearly 11 months earlier by Louise Yamada, the doyenne of technical analysts who heads the eponymously named Louise Yamada Technical Research Advisors.

Just as in 2000, when she wrote of the prospect of a structural bear market in stocks after 18 years of a structural bull market, now Yamada similarly warns that after three decades of declining bond yields (and rising bond prices), a structural bond bear market is in the offing.

Indeed, the 30-year decline in interest rates has been the best bond bull market in the 200-plus-year history of the U.S. that she traces back to the 1790s. But all cycles come to an end; the question is how and when.

The key test whether a new, structural interest-rate cycle has begun would be if a long-term Treasury yield — whether for the 10-year or 30-year maturity — breaks the 5.50% mark, she says. The 30-year bond stopped short of the 5.50% mark in 2006 and 2007; it currently yields 4.40%.

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I'm the executive vice president for a steel casting trade association, the Steel Founders' Society of America. I've got a crazy wife, five crazy children, three crazy people that married into the family, and two crazy fun little grandsons.

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