Wednesday, September 26, 2018

Everyone expects Mr. Bond to die

Mid-week market update: For a change, I thought it was more appropriate to write about bond yields instead of the usual tactical trading commentary about stock prices on this FOMC day.

Increasingly, there has been more and more bearish calls for bond prices (and bullish calls for bond yields) as the Fed continues its rate normalization program. Some analysts have pointed out a nascent inverse head and shoulders formation on the 30-year yield (TYX). With the caveat that head and shoulders formations are never complete until the neckline is broken, a decisive upside breakout in TYX would be bad news for long Treasury prices.

I would argue against an overly bearish view for bonds. At a minimum, bond yields are unlikely to rise as much as expected, and they may actually decline slightly from current levels.

The full post can be found at our new site here.

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