Tags: stock | rally | treasuries

Citi: Treasury Yields Could Torpedo Rally

By    |   Monday, 09 Nov 2009 10:03 AM

Rising Treasury bond yields may put an end to the global stock rally, says Yutaka Yoshino, chief technical analyst at Citigroup in Tokyo.

Investors have been borrowing dollars at low interest rates to invest in stocks around the world — the so-called carry trade.

But if 10-year bond yields, now about 3.50 percent, surpass 3.55, that would signal a rise in U.S. interest rates, Yoshino tells Bloomberg.

That in turn could stanch investors’ desire for the carry trade.

“If we pass that 3.55 level on the yield, we stop being in a rebound phase (from the Oct. 1 low of 3.18 percent) and enter into a rising trend,” Yoshino said.

“Inflation concerns are starting to creep in, and the Federal Reserve has no control over long-term interest rates.”

U.S. stocks could drop as much as 14 percent, with the Dow Jones Industrial Average hitting 8,600, and Japan’s Nikkei 225 Stock Average may fall the same amount, he said.

Yoshino’s calculations come from the Japanese technical analysis method of “ichimoku kinko,” which utilizes wave patterns and repeating trends.

Ichimoku kinko was devised by a Japanese journalist more than 70 years ago and resembles the Elliott Wave theory popularized by Robert Prechter.

Yoshino’s not the only one warning of stock declines.

Investment guru Gary Shilling told Forbes, “I think there's been a bubble in (U.S.) stocks.”

He predicted the Standard & Poor’s 500 Index could drop 35 percent.

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Rising Treasury bond yields may put an end to the global stock rally, says Yutaka Yoshino, chief technical analyst at Citigroup in Tokyo.Investors have been borrowing dollars at low interest rates to invest in stocks around the world — the so-called carry trade.But if...
stock,rally,treasuries
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2009-03-09
Monday, 09 Nov 2009 10:03 AM
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