U.S. Government Bond Yield Curve

A number of things are happening simultaneously to first support the gold price, as in the continual downward pressure on yields in the discount rate, and a decline in price of the entire yield curve on the longer end.

Theory says that any time you have an equity price decline across the board, this would bid up bond prices and lower yields. But you have a concomittant decline in equity prices and bond prices, with the exception of the short end of the yield curve.

So this has resulted in a change of complexion, where once you have skin heavily built up with foundation, now showing spots.

TLT declined 1.45%, while TBT rose 2.81%, nearly living up to its 2X ultrashort title.

Here is what the government yield curve looks like:

source: http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/

As an intermarket contrary indicator, this would suggest that anyone first selling GBN.V shares and betting on the rise in treasuries will be obliged to settle by buying back GBN.V shares pronto as treasury prices decline.

GBN.V rose 5.66% on the day. This was a complete reversal of Wednesday, when GBN.V shares recorded a nominal low.

Monday will be very interesting to say the least, should long bond prices continue to sell off.

-F6