The 30 Year Treasury yield is up to 3.42%, up from 3.18% the week earlier and up from 3.09% a month ago.  The 10-Year Treasury yield is 2.30%, up from 2.03% a week ago and up from 1.93% a month ago.  While this is still “exceptionally low” by historic standards, there seems to be something happening here for the equity investors versus bond investors.

Earlier today we outlined the catalysts for the case of a DJIA 14,000, even though we will be the first to admit that the market is getting overbought.  What is happening is that no one really believes that the FOMC can maintain that exceptionally low interest rate bias out until the end of 2014.  Even if the recovery keeps chugging along at a snail’s pace, the ‘against’ argument is starting to win.

The ProShares UltraShort Lehman 20+ (NYSE: TBT) has risen almost 10% this week from trough to peak and that is no easy task.  Unless something interrupts the markets or unless some new shoe drops, our take is that Mr. Bernanke is going to have to start referring back to “his caveats that would allow the Fed to remove the end of 2014 outlook.”

Fed governor Lacker is the current dissenting vote on the ‘to 2014’ outlook.  That may be different at the next FOMC meeting.

JON C. OGG

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