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Yield on 10 Year Treasury

The yield on the 10 year treasury bond has been trending up since March.

We appear to have bounced off a resistance line, but the likely move will be for the yield to move through the resistance and head higher.

The inflation news on the CPI and PPI being at multi-year highs virtually guarantees that the bond market will continue to sell off and yields on bonds will continue to move higher. If you own any bond mutual funds, you will likely see your total return be negative as you lose more in principal value than you will gain in interest, unless they are extremely short duration funds.

The good news with this is that since the bond market is falling and yields are increasing, the Fed feels less pressure to raise short-term Fed Fund rates, so they may stay on hold for longer than people anticipate. This will give the troubled banks some additional breathing room to work on their balance sheets by borrowing at cheaper rates.

The rest of the bad news is that a falling bond market is not good for the stock market, in general.

Be careful with your personal risk management strategies in the managing of your investments – be more concerned with the return OF your capital and not the return ON your capital.