Be careful with Bonds. There has been as heavy manipulation in that market as they has been in keeping Gold down. 2001 the US stopped selling 30 year treasuries. IMO they were hoping that with the gradual cashing in of these bonds and no new supply added to the mix that it would force the yield on this bond into a gradual spiral upward creating a steep curve.
The Fed could easily pump Interest Rates up to their hearts content knowing full well that thy just had to stay a few basis points behind the yield on the 30y. You could theoretically have a 15% Interest Rate and never go into a recession.
In Recession I mean that when IRs break over the 30y Yield it causes Short Term Rates to spike and the 30 year rate t drop. That forces a flight to quality as everyone exits the markets hoping to lock in a high price on those bonds before they collapse with equities in the following recession.
Greenspan even admitted in his debut in "Mr. Greenspan goes to Capitol Hill" that the lagging of the 30y was perplexing and he didn't know why it wasn't reacting to rising rates.
IMO, they are going to pull as many aces out of their sleeve to get that 30year moving on at a faster rate that the shorter term bonds. The South Korean scare was all according to plan. It wasn't a Central Bank crying Uncle. It was Central Bank crying Wolf.
If their current measured pace in Interest Rate hikes keeps going up and the 30 year keeps going down they will met somewhere around 3 - 4%. That cross will signal a recession. When have you every seen a recession when Interest Rates were under 5%?
And according to plan, what is the remedy for a recession? The Fed lowers Interest Rates. So the Fed starts lowering interest Rates back down at a rapid pace. Somewhere in the range of 50 to 100 basis points a meeting from their 3-4% top. That causes a further collapse of the 30 year rate and a drop of the Real Rate further into Negative territory. That is good for gold!
Japan had that happen to their Target Call Rate when they went into deflation. They are around 6% for their rate around 1989. They hit recession and started dropping their rates gradually to Zero! They held it there for about 5 years and attempted to move off of near zero up to around .5%. Well that sparked another recession at .5% target rate! It wasn't until 2000 that the Japanese government along with their Central Bank announced that they were in a deflationary phase. They denied it for 10 years. Now look at them. 5 years later announcing again that they are recessing even more. Even Germany is coming up to the table and admitting they are in a Recession. The United Kingdom as an Inverted Yield curve which signals a recession but like all policy makers thy will deny it until it hurts their economy. Then they will admit to it and start trying to fix it.
The global economy is going into a massive deflation and each of the major economies are falling one by one.
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