The bond market meltdown continues ...

There's no rest for the weary in bond-land this morning. Treasuries continue to get whacked, with long bond futures off 22/32 at last count. 10-year T-Notes were recently yielding 5.18%, up about 5 basis points from yesterday. Obviously, what we're seeing is wave after wave of forced selling -- the kind of liquidation you don't see very often, but when you do, it can get ugly.

I looked back at the last several years of trading in long bond futures and found three similar selling squalls --the first began in November 2001, when a big run-up (sparked by the government's plan to abandon 30-year bond sales) was followed by an even more powerful sell-off. Then we had the big run-up in the spring of 2003, spurred by deflation fears, followed by an even more powerful sell-off. Finally, in early 2004, we had a sharp plunge on the belief the economy was finally regaining its footing.

The magnitude of those declines, price-wise, from high to low? Roughly 12%, 16.6%, and 12.7%. We also had a sharp rise in bond prices, followed by a plunge, in 1998 during the time of the Long-Term Capital Management scare. That decline, peak to trough, was about 7%.

How do things look this time around? Well, from the most recent peak in early May, we're only down about 6% in price. In other words, there could be more ugliness ahead -- though we are closing in on what I'd call pretty solid technical support in the low-to-mid 105s.