(Janus) B.Gross - Monthly Outlook - US 10y 2.6% is the trigger for BEar Market

And this is my only forecast for the 10-year in 2017. If 2.60% is broken on the upside – if yields move higher than 2.60% – a secular bear bond market has begun. Watch the 2.6% level. Much more important than Dow 20,000. Much more important than $60-a-barrel oil. Much more important that the Dollar/Euro parity at 1.00. It is the key to interest rate levels and perhaps stock price levels in 2017.."


"...The assessment of future growth and associated risk spreads is still uncertain of course. President-elect Trump tweets and markets listen for now, but ultimately their value is dependent on a jump step move from the 2% real GDP growth rate of the past 10 years to a 3%-plus annual advance. 3% growth rates historically have propelled corporate profits to a somewhat higher clip because of financial and operating leverage dependent on higher growth. 2% or less typically has smothered corporate profits. The 1% difference between 2 and 3 is therefore critical. We shall see whether Republican/Trumpian orthodoxy can stimulate an economy that in some ways is at full capacity already. To do so would require a significant advance in investment spending which up until now has taken a backseat to corporate stock buybacks and merger/acquisition related uses of cash flow. "

"...The critical question of interest rates and the future level of the 10-year Treasury is equally challenging. While the Fed has begun to tighten policy after abandoning Quantitative Easing several years ago, other major central banks continue to stoke the fire with as much as $150 billion of monthly buybacks. With the pinning of Japanese JGB 10-year yields at near 0% and the ongoing dovishness of Draghi’s ECB, global arbitrage effectively caps the 10-year at 2.4% to 2.6% levels. Currency adjusted yield pickups of 70 basis points by selling 10-year JGB’s or German Bunds and buying U.S. Treasuries, outline the artificial pricing of our 10- year, even as inflation moves higher and short term yields are raised by the Fed once, twice, or three times in the next 12 months."