What ripple impacts would take place if interest rates rise 50% from current levels: Mortgages impacted? Government debt cost rise? Underfunded pension costs increase?
Danger Ahead
The 10-year yield created a bullish inverse head-and-shoulders pattern, starting back in 2011. If the pattern is true, it would suggest that much sharper interest rates are in our future.
In May, the Power of the Pattern suggested rates were about to blast off badly hurting bonds. (see post here) Rates have blasted off since that post in May, hitting bonds, sending them into negative returns for the year.
Falling Resistance
Now, yields are facing a falling resistance line and we have to view that line as stiff resistance.
Remember....Resistance is Resistance until broken. A challenge would come if interest rates push above this falling channel resistance line toward the 20-year resistance line (2) in the chart above, ushering in a 50% rise in interest rates. If that happens, it would be painful to many key parts of the economy. A rally in yields could create the "Perfect Portfolio Storm!" (see post here)