No, this isn’t a chart of the beginning of the collapse of crude oil’s price in the summer of 2008: it’s the price movement of the U.S. 30- year bond over the last couple of months. The U.S. 10-year treasury bond looks just as ugly.

Supply is the one storm lurking on the horizon for bond investors. According to Bloomberg, the U.S. Treasury Department has almost $500 billion of government securities for sale in the first quarter of 2009. The problem for the bigger picture is that rising yields can undo action the Federal Reserve is taking to stimulate the economy. Of course if the whole scheme works, then there are inflation expectations to begin to think about.

Unless one is convinced that this recession will morph into a depression, then the outlook becomes dim for investors in Treasuries. One has to face a known deluge of supply, and possibly inflation issues down the road. Perhaps this is why corporate bond issuance so far in 2009 has been at its highest rate, in dollar terms, in a year.