Have interest rates rallied in a big way over the past 20 weeks? Indeed they have as we look back on the largest 20 week rally in history.
The question everyone is asking, though, is whether or not rates have peaked in the short term or will they continue higher?
Below looks at the yield on the 10-year note over the past 30 years.
This past summer, the world was convinced that bonds were going to keep pushing higher and yields were going to stay low, as 95% of investors were bullish bonds at (1).
After experiencing the sharpest 20-week rally in history of the 10-year note, investors are now feeling very comfortable that rates are going to keep pushing higher at (3), as only 5% of investors today are bullish bonds.
Sometimes the majority finds itself caught on the wrong side of the trade. The crowded trade in bonds in July was on the wrong side (being long when it should have been short).
Now investors are comfortable getting out of bonds after the historic rally, creating a crowded trade that is the polar opposite of what we saw this past summer.
We urged members this past summer to short bonds at (1), when 95% of investors were bullish bonds. The patterns that are in play today seem to favor the opposite of the crowded trade yet again.