Like most sources of information connected to our financial markets, before you hear the real story, it will be too late. By now I probably sound like a broker record, but if you are relying on Wall Street or timely government reports to tell you the truth, you are in for a rude awakening.

I am not sure who is responsible for our rising bond yields, but I find it odd that interest rates starting rising across the board right after Alan Greenspan met with bankers in China.

Here is a snapshot of how U.S. Bond yields closed today:

30-Year T-Bond 4.713% +0.053% 10/25/05
10-Year T-Note 4.508% +0.062% 10/25/05
5-Year T-Note 4.379% +0.064% 10/25/05
2-Year Note 4.331% +0.086% 10/25/05

To get a comparison of how dramatic the move has been, here are the yields around the 1st of September:

30-Year T-Bond 4.23%
10-Year T-Note 3.93%
5-Year T-Note 3.77%
2-Year Note 3.63%

So, what's happening here. Are foreign governments in fact selling U.S. debt, and allocating those assets to other countries? At this point, anything I say is pure speculation. But, I have been warning investors for quite sometime that countries like China and Japan hold our financial futures in the palm of their hands.

On October 20th I wrote:

"Venezuelan President, Hugo Chavez, recently ordered the sale of $14 billion dollars of US Bonds, and moved the money to Europe. Could this unwinding of US assets be pushing up LT rates? We won't know the real answer until its too late".

Regardless of what others think of Hugo Chavez, at least he had the guts to say what he was doing upfront and in the open. We will never know what Greenspan and the central bankers of China discussed, but I find it odd that our bond market began selling off right after their visit.

Mind you, we were not caught off guard by the move in the bond market. I don't know if the sell-off is the start of something big, but I have been of the opinion for the past two years that interest rates were entirely too low and they would eventually move back to their historical mean.

In January of 2004, I wrote:

The rise in interest rates from historically low levels is a good a sign that the economy is recovering. I think interest rates will continue to rise over the next year or so with the shorter maturities seeing the biggest jump in yields. Historically, the long bond (30 yr. treasury) should settle in at 5.5-6.0% over the next 18- 24 months. Unfortunately, as the economy begins to heat up, there will be a lot of talk on the financial channels about inflation and the Fed having to raise rates. Alan Greenspan and company do not want to make the same mistakes they made in 1999-00. Greenspan thought he saw inflation when in reality he saw “pink elephants”. The rise in interest rates began the gut wrenching decline that we all experienced since the year 2000.

I still am of the opinion we will see a 5.5-6.0% long bond before rates stop rising. This is one reason why I think 2006 will be a rough year for the stock market.