Customer Service 1 (888) 261-2693
Please enter Search keyword. Advanced Search
Home About Us Resources Archive Free Reports Market Window

Here's Why Long-Term Interest Rates Will Rise in 2018

By Brett Eversole
Tuesday, January 2, 2018

Exciting news...
 
Economists have come out with their predictions for interest rates this year.
 
They're all expecting long-term interest rates to rise. It's the same default setting they've been stuck on for decades. And guess what...
 
It has been wrong... for decades.
 
They say it every year. But since the 1980s, 30-year Treasury bond yields have been on a one-way road lower. Is this the year the economists will finally be right?
 
Actually, yes.
 
The last time we saw a setup like today, the yield on 30-year Treasury bonds rose more than 1% in less than six months.
 
History says higher rates are likely in the new year. But this signal has nothing to do with the economic reasons most people expect.
 
Let me explain...
 
Despite the usual chorus, long-term interest rates fell once again in 2017.
 
The 30-year Treasury yield fell from around 3% at the start of the year to around 2.8% at the close.
 
That's not a major decline. But it has caused a major shift in sentiment. That shift could mean the economists calling for higher rates might actually be right this time around.
 
You see, Treasury bonds – and the yields they pay – work like any other asset. When folks all expect them to move one direction, they tend to move the other way.
 
Today, traders are overly bullish on Treasury bond prices. And since bond prices and interest rates move in opposite directions, that means traders (unlike economists) are betting massively on lower rates right now.
 
We can see this by looking at the Commitment of Traders (COT) report. The COT report shows the real-money bets of futures traders.
 
Right now, traders are near all-time levels of optimism on 30-year Treasury bond prices. Take a look...
 

Again, bond prices and interest rates move in opposite directions. So this optimism about bonds means that futures traders are expecting rates to fall...
 
History says the opposite should occur.
 
You can see the last time optimism was near today's level was mid-2016. Traders all expected lower rates back then... But they didn't get them.
 
Instead, the 30-year yield rose around 1% in less than six months. It was a major move higher for rates (and lower for Treasury bond prices).
 
We have the same setup today.
 
For the first time in years, we're seeing a sign that the chorus of "higher rates this year" could be right... but not for the reasons folks expect.
 
We're seeing it because sentiment is stretched too far in the opposite direction.
 
The rubber band is due to bounce back. And that's the reason we'll likely see higher long-term Treasury yields this year.
 
Good investing,
 
Brett Eversole




Further Reading:

"I love a hated investment," Steve says. Recently, his favorite contrarian tool showed traders were extremely bearish on one commodity... And based on history, prices could rise 31% over the next year. Read more here.
 
"Small-business owners are as positive about today's outlook as they've been in 34 years," Brett writes. In a recent essay, he details what this optimism means for stocks and the economy... Learn more here.

Market Notes


NEW HIGHS OF NOTE LAST WEEK
 
CF Industries (CF)... fertilizer
BP (BP)... oil and gas
Chevron (CVX)... oil and gas
ConocoPhillips (COP)... oil and gas
Royal Dutch Shell (RDS-A)... oil and gas
Valero Energy (VLO)... oil and gas
Arch Coal (ARCH)... coal
Freeport-McMoRan (FCX)... diversified mining
Rio Tinto (RIO)... diversified mining
Southern Copper (SCCO)... copper
Alcoa (AA)... aluminum
Union Pacific (UNP)... railroads
C.H. Robinson Worldwide (CHRW)... shipping technology
Burlington Stores (BURL)... discount retailer
Five Below (FIVE)... discount retailer
Ollie's Bargain Outlet (OLLI)... discount retailer
Best Buy (BBY)... TVs, computers, appliances
Discover Financial Services (DFS)... credit cards
Darden Restaurants (DRI)... LongHorn Steakhouse, Olive Garden
Bob Evans Restaurants (BOBE)... family dining, packaged food
Dunkin' Brands (DNKN)... coffee and baked goods
Marriott (MAR)... hotels
KB Home (KBH)... homebuilder
Lennar (LEN)... homebuilder
Home Depot (HD)... one-stop shop for home repairs
Lowe's (LOW)... one-stop shop for home repairs
United Rentals (URI)... equipment rental
Fiat Chrysler Automobiles (FCAU)... cars and trucks
 
NEW LOWS OF NOTE LAST WEEK
 

premium teaser

Strong optimism means one commodity faces tough times ahead...
 
Investors have now hit record bullish levels in another corner of the market...
 

Recent Articles
Legal Notices: Stansberry Research LLC (Stansberry Research) is a publishing company and the indicators, strategies, reports, articles and all other features of our products are provided for informational and educational purposes only and should not be construed as personalized investment advice. Our recommendations and analysis are based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.

 

Readers should be aware that trading stocks and all other financial instruments involves risk. Past performance is no guarantee of future results, and we make no representation that any customer will or is likely to achieve similar results.

 

Our testimonials are the words of real subscribers received in real letters, emails, and other feedback who have not been paid for their testimonials. Testimonials are printed under aliases to protect privacy, and edited for length. Their claims have not been independently verified or audited for accuracy. We do not know how much money was risked, what portion of their total portfolio was allocated, or how long they owned the security. We do not claim that the results experienced by such subscribers are typical and you will likely have different results.

 

Any performance results of our recommendations prepared by Stansberry Research are not based on actual trading of securities but are instead based on a hypothetical trading account. Hypothetical performance results have many inherent limitations. Your actual results may vary.

 

Stansberry Research expressly forbids its writers from having a financial interest in any security they recommend to our subscribers. And all Stansberry Research (and affiliated companies), employees, and agents must wait 24 hours after an initial trade recommendation is published on the Internet, or 72 hours after a direct mail publication is sent, before acting on that recommendation.

 

© 2024 Stansberry Research, LLC. | Privacy Policy| Customer Service
Stansberry Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This website may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry Research, LLC. 1125 N Charles St. Suite 500, Baltimore MD 21202.