‘Moment Of Truth’ For Bond Market Is Here, Gundlach Imagines, As Yields Rise

Jeff Gundlach is excited about rising bond yields.

And that’s the truth. Literally. Because here’s what he said on his “truly” absurd Twitter feed @TruthGundlach:

So that’s “TruthGundlach” saying that the moment of “truth” has arrived for the secular bond bull market. Stop it, Jeff. There’s only so much “truth” we can take.

Of course the “truth” is that Jeff is a raving lunatic who lost track of reality months ago and thereby can no longer be trusted to tell the “truth” about anything, so thankfully, we’ve got charts to look at.

2.40 on 10s is important – I guess – and overnight, we moved pretty squarely above that when Treasuries sold off during the European session. They were following gilts, which themselves moved lower on U.K. 3Q GDP data. Here’s the print:

• U.K. First Estimate 3Q GDP Rises 0.4% Q/Q; Med. Est. 0.3% Q/Q

Here’s the reaction, first in gilts and Treasurys…

…and then in the pound:

Obviously, the idea here is that the upbeat GDP print raises the odds of a BoE hike next week although as the following chart shows, what counts as “good enough” to warrant a hike has changed materially in the post-crisis world  :

“Today’s growth figures show that, despite the Brexit headwinds, U.K. growth is good enough to give the bank the green light for a rate rise next Thursday,” said Ian Stewart, chief economist at Deloitte.

Ok, fine. Whatever. As far as Treasurys go, Bloomberg notes that “after hovering around 2.40%/2.42% support during Asia session, UST 10Y yield briefly topped 2.45%, triggering futures volumes surge” following the UK GDP numbers. As those numbers hit, more than 100k UST 10Y futures traded over a 30- minute period.

Here’s why 2.40 “matters”:

So is Gundlach right? Does this signal the beginning of the end for the secular bond bull market and the start of a new era characterized by the triumph of the bears?

Or will some bullish “Walter” somewhere tell “Smokey the Bear” that 2.40 is “over the line”?….