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What ripple impacts would take place if interest rates rise 50% from current levels? Mortgages impacted? Government debt cost rise? Underfunded pension costs increase?
The 10-year yield created a bullish inverse head & shoulders pattern, starting back in 2011. If the pattern was to be true, it would suggest much sharper interest rates were in our future. In May the Power of the Pattern suggested rates were about to blast off and bond would get hurt badly. (see post here)
Rates have blasted off since that post in May, hurting bonds, sending them into negative returns for the year. Now yields are facing a falling resistance line and we have to view the line as stiff resistance at this moment.
Remember….Resistance is Resistance until broken!
A challenge would come if…..interest rates push above this falling channel resistance line and head towards the 20-year resistance line (2) in the chart above, a 50% rise in interest rates would take place!!!.
If this would happen, this could be rather painful to many key parts of the economy. A rally in yields could create the “Perfect Portfolio Storm!” (see post here)