Larry Pesavento: “Thirty years ago in the spring of 1981 the yield on the 30-year treasury bond issued by the US government was above 16%. The bond carried an 8% coupon, but the price of the bond had dropped below 46. This meant that you could buy one hundred thousand dollars of treasury bonds for $46,000, and cash them in at maturity for $100,000. In 1981 inflation was rampant above 15%, gold had retreated from its high of 865 and ounce, and the country was in turmoil to say the least. Since that time, interest rates have dropped every year over the past 30 years making this one of the longest bull markets in bonds in history. The chart we are showing today is a long-term weekly chart of the thirty-year T-bond.
Several patterns are apparent to the trained eye. Of particular interest is the pattern that is completing at the present time known as the thunderbolt, or AB=CD pattern. This pattern measures equal and parallel moves and is present in just about everything that trades with a liquidity on the worldwide basis. In addition a double top can be seen. This has the potential of being the trade of the decade, i.e. interest rates are going higher. No one in their right mind thinks this could happen but just looking at the charts it appears that this could be the case. The downgrading of U.S. Treasury bonds and notes by Standard & Poor’s did little to slow down the upward move of these instruments and make rates go even lower. What we’re waiting for now is a sign that the top is finally in. This sign will come after we have a correction and then one more retest hopefully at the 61% retracement were we can enter with a stop above the reason highs of 144. Bonds have not stopped going up as yet and they could still reach 151 making new highs from 2008.
Ask yourself this question, is there anyone that I would lend money to for 10 years at a rate of 1.9% per year? I think we all know the answer to that question. However, the prevailing financial minds believe that rates are going to go even lower. Herein could be the big surprise for the rest of this decade.”