The 10 Year Treasury Note is the benchmark debt product of the Treasury and as the benchmark it's meant to represent the strength of the U.S. Treasury's balance sheet. If this holds true, the current fiscal strength of the U.S. Treasury is hampered at best. Debt markets are generally much less exciting than equity markets, as bond yields tend to stay fixed within the 10% range, while we all hear stories of individuals reaping fortunes off of stocks. But the debt markets are crucial to business and should be watched more closely by investors amidst such volatile credit scenarios in the private and public sectors.

Just this week we have seen increasingly bearish signals for U.S. Treasury debt as a whole, especially long term obligations, as the 10 and 30 year note auctions have extended a short term pullback from record demand levels in the past months. Wednesday we saw the bid-to-cover ratio of the 10 Year Note auction fall sharply from the October high of 3.01 to 2.62, citing a decrease in demand for U.S. debt. On Thursday there were further red flags raised as the effective "high yield" during the 30-Year Treasury auction jumped to 4.52% despite the same coupon rate as the lower yielding November auction.

   
 
There will soon come a time where equities and government bonds perform inversely to one another, because in moderately frightening times U.S. debt is seen as a better alternative to cash. However the 10-year note has peaked and begun to fall as investors realize the hazards to investing in the long term credit of the United States. U.S. debt default is not a part of the question, yet the rating of the debt has been threatened by credit rating agencies Moody's and S&P, suggesting that holding the interest bearing notes for an extended period will cause one to lose money, as higher rates are assuredly ahead for a 0.01% Fed Funds targeting U.S. Central Bank.

Judge for yourself and take a look at the possibilities for the 10 Year treasury to fall further as the yield continues to rise. Nearly one month ago we endorsed this position as a medium term play on low interest rates and a hedge against U.S. equity shorts in our "Shorting the 10-Year Treasury" article. Below is a chart of the 10 Year Treasury yield which moves in tandem with such Treasury short funds as the TYO (Direxion 10-Year Treasury 3x Bear ETN).

While you may not have opened a Short 10-Year Treasury position when we first endorsed it on November 13, you have a new opportunity to see the yield rising with momentum, and have the luxury of waiting for the yield to pull back before making a short play. Remember, the yield goes up when the bond price drops, thus raking in gains for Treasury bear positions. Diamond Slice currently holds a minor position in the TYO ETN and plans to add to the position on pullbacks due to the bullish momentum and MACD averages showing bullish trends above zero.

Disclosure: Long TYO