Next Wednesday, the FOMC will make its last announcement of 2025 The nearly universal consensus is that they will cut interest rates another quarter-point. As a chartist, I’m finding the interest rate market quite interesting since short-term rates seem poised to keep collapsing, yet the longer you go out, the more stubborn they appear to be. Here, for instance, is the one-month rate, which spiked massively higher for has been in a near free-fall lately.
The two year also looks poised to go much lower (remember, these are rates, not the debt instruments themselves). If this were a stock chart, I’d want to short it.
The five year still has a rounded-looking top, but the pattern isn’t complete yet, and it might not break.
Once you get to the 10-year, the situation changes radically. Not only does the rounded top not look anything like it’s going to break, but the rate has been getting frisky, bursting above the pattern and seemingly refusing to go any lower.
And once you reach the thirty-year extreme, the rate looks like it has every real prospect of pushing higher, perhaps even substantially. Thus, dreams of the ZIRP-like environment of a few years ago seem preposterous, and the U.S. will continue shelling out over a trillion dollars every year just in interest payments. It’s brutal.
All of which probably goes a long way to explaining why the T-bond futures are sporting a “pattern within a pattern” which looks ready to tumble (green tint), even giving the mega-bearish pattern (pink tint) the chance of someday completing.
It will be interesting to see where all the above charts are in a week’s time!
