Today's Major Market Move: U.S. 30 Year Treasury Rate Flat Last 3 Weeks

Today we're doing something a little bit different. Instead of covering a change with a large magnitude, we're going to talk about a financial entity that, over a certain time frame, lacks any change at all. Over the past three weeks, while the prices of both Brent and WTI climb higher, the interest rate of the long bond has returned back to where it started. The following graph compares % change in the 30 year bond rate against the price of WTI front month futures:

Click here to go to the live chart.

If someone wants to find out who has missed the rallies in precious metals, oil and equities over the past 2 years, they need look no further than the bond market. Bonds have essentially remained flat over that time frame so that indicates that there are plenty of people out there who remain completely unconcerned by the threat of inflation. If the 30 year rate, which now sits at 3.10, were to double to a still historically below average 6.20, the current investors are going to get smashed.

Of course it's not just the U.S. Germany, the U.K. and Japan continue to see ridiculously low long term interest rates as well.

Click here to go to the live table.

What we find extremely interesting is that portfolio managers like Bill Gross, who runs one of the largest bond funds on the planet, on the one hand laments all of the liquidity that central banks provide but on the other hand parks 38% of the fund in Treasuries and Treasury related securities. It is because so many private investors continue to hold U.S. bonds that the Fed is able to keep the spigot wide open. Take this statement from Gross in a recent interview (courtesy of Reuters via CNBC):

"Over the past 30 years, an offensively minded Federal Reserve and their global counterparts," or other central banks, "were printing money, lowering yields and bringing forward a false sense of monetary wealth," Gross wrote.

The Fed has very little direct control over long term rates. It is fund managers that hold massive amounts of bonds, such as our friend Bill Gross, that keeps the rates so low.