US corporate and Government rally may have seen the best - time to sell?
Peter Oberois
Oct. 3, 2006

There is a lag between gold prices and the bond yields. If that is correct and stagflation is the real environment then, bond yields can actually test the highs in yields.

US corporate and Government rally may have seen the best - time to sell?

The state of US economy is strange. It may take advantage of the inverted yield curve and straighten the curve somewhat while Federal Reserve waits and think. If that happens the ten year note can test the 5.2% again. The long bonds had a fabulous rally while commodity price is still relatively high. A retrace somewhat can take yields up from 4.6% to 4.95%. That says it is time selling corporate and Government bonds.

However, there is another scenario. China in order to bring stability in its currency will try to buy more US bonds and sell its own currency like Bank of Japan did for a long time with yen.

It is possible US bonds will retrace somewhat and then yields fall below 4.5% for the ten year note.

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