US Long Treasury Bond

The yield on the long guy has been trending up since 7/12. The market took its cue from
the Bernanke promise to re-engage QE programs and just as industrial commodities price
indices began to turn up. The T-bond market remains as highly sensitive to the direction
of industrial raw prices as ever. Now I use a 6 mo. momentum indicator which combines
production with sensitive materials prices to give me a a little bit of a longer term
perspective on the direction of yields. This indicator has also recently turned up but is
still comparatively quiet. Nevertheless, the fundamentals have turned in favor of higher
yields. I would note that although my production / industrial pricing indicator has turned
up, there has yet to be a decisive positive reversal of momentum on a trend basis. The
implication here is that if US and global business pick up strength in the months ahead,
the long Treasury yield could climb sharply while the bond's price falls.

I have included a long T-bond yield chart with the bond's price in the bottom panel.
30 Yr. T-Bond Yield  Note the line at the 3.50% level. Should the yield rise to 3.50%,
I'll add the bond back to my list of tradeables. Note as well the reversal of trend that has
occurred following a nearly 18 month downswing in yield. Experience says "Respect
that".

I have also included a 5 year chart of industrial commodities input costs. The chart runs
through 11/12 and does not reflect another significant 3% jump in the index for Dec. '12.
Index Mundi IC

Both the T-bond yield and sensitive materials prices do ok as leading economic indicators
in my book.