3.18% anyone? Anyone? Money market you ask? No, no you foolish investor. We don't want your money for only few weeks. We want your money for 30 years! Are you in? Come on, gimme, gimme, gimme your money. What? Not interested? Well GO see the guy next door then. I KNOW he only needs your money for 10 years but HE'S only going to give you 2.67%! Plus he works for the same guy I do.

Of course I'm talking about the 30 year and 10 year government bond yields as of today. It shouldn't be a surprise as Mr. Bernanke told us the Fed would attempt to manipulate longer dated government yields in his famous "Helicopter Ben" speech in November 2002. Here is an excerpt:

"So what then might the Fed do if its target interest rate, the overnight federal funds rate, fell to zero? One relatively straightforward extension of current procedures would be to try to stimulate spending by lowering rates further out along the Treasury term structure--that is, rates on government bonds of longer maturities.⁹ There are at least two ways of bringing down longer-term rates, which are complementary and could be employed separately or in combination. One approach, similar to an action taken in the past couple of years by the Bank of Japan, would be for the Fed to commit to holding the overnight rate at zero for some specified period. Because long-term interest rates represent averages of current and expected future short-term rates, plus a term premium, a commitment to keep short-term rates at zero for some time--if it were credible--would induce a decline in longer-term rates. A more direct method, which I personally prefer, would be for the Fed to begin announcing explicit ceilings for yields on longer-maturity Treasury debt (say, bonds maturing within the next two years). The Fed could enforce these interest-rate ceilings by committing to make unlimited purchases of securities up to two years from maturity at prices consistent with the targeted yields. If this program were successful, not only would yields on medium-term Treasury securities fall, but (because of links operating through expectations of future interest rates) yields on longer-term public and private debt (such as mortgages) would likely fall as well."

"Lower rates over the maturity spectrum of public and private securities should strengthen aggregate demand in the usual ways and thus help to end deflation. Of course, if operating in relatively short-dated Treasury debt proved insufficient, the Fed could also attempt to cap yields of Treasury securities at still longer maturities, say three to six years. Yet another option would be for the Fed to use its existing authority to operate in the markets for agency debt (for example, mortgage-backed securities issued by Ginnie Mae, the Government National Mortgage Association)."

Get the idea? Anyone who wants to short the bond market is playing with fire. And if this idea doesn't work, Bernanke follows with:

"To repeat, I suspect that operating on rates on longer-term Treasuries would provide sufficient leverage for the Fed to achieve its goals in most plausible scenarios. If lowering yields on longer-dated Treasury securities proved insufficient to restart spending, however, the Fed might next consider attempting to influence directly the yields on privately issued securities."

If you've never read that complete speech you should. It gives a pretty decent road map as to what they're likely going to attempt to do next. It was this speech that convinced me that Mr. Bernanke would succeed Greenspan as Fed Chairman.

I could say much, much more on this topic but that's for another time. As far as the markets go, they're more overbought tonight than last Friday night. We know what happened Monday.  I'm waiting with baited breath to see tomorrow. Will it matter? If it doesn't, and if the market behaves like it did today, like it wants to go up regardless, then that would tell me the bulls were back in control. It would still have to get over 900 or so. Also a pullback tomorrow, and even Friday would be constructive for the bullish case right here as long as it stayed above Mondays lows. 

Also note that the bold text in Bernankes speech was my emphasis.