Monday, May 14, 2018

Tame inflation? Don't get complacent!

The Treasury market rallied last week when the 10-year Treasury yield tested the 3% level and pulled back.



The decline in yields (and bond prices rally) was not a big surprise for a number of reasons:
  • 10-year yields (TNX) was exhibiting a negative RSI divergence
  • A tamer than expected Consumer Price Index
  • Hedge funds were in a crowded short in the 10-year T-Note and T-Bond futures
While the bond market rally is likely to have a bit more leg over the next few weeks, my inclination is to enjoy the party, but don't overstay the festivities.

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