Watch for a Flip in Real Interest Rates

In a Market Blog posting, David Berman refers to John Hussman's weekly market comment, and states:

On that note, Mr. Hussman – who worked at the Chicago Board of Trade in the mid-1980s – is particularly bearish. He believes that the commodity bull market will shift into reverse within a few months, when the yield on the 10-year U.S. Treasury bond rises above the year-over-year inflation rate, as measured by the consumer price index.

In other words, he believes that commodity prices will be in trouble when real interest rates flip into positive territory from negative territory. At the moment, the 10-year benchmark bond is yielding 3.7 per cent and the CPI was 4 per cent year-over-year in March, meaning that real rates are slightly negative – which is widely identified as one of the drivers of the current commodities boom.

Something to keep an eye on...