Bonds & Fixed Income

Quarterly Chart of 10-Yr Rates vs Bonds Says Exit Now!

Treasury interest rates are starting to climb and may not necessarily wait patiently for economic data to justify their moves. The most recent news has given no alarm for an overheating economy, especially last week’s disappointing U.S. GDP report. Yet, thus far the 10-Year Treasury Rate has climbed from last Friday’s close at 20.92 to this Tuesday’s closing price at 22.66. That reflects an upside move of 8.3% in just two days.

Some interest rate volatility is normal. However, what concerns me is its expanding range and recent tendency towards the upside. I really believe that we witnessed a bottom for 10-Year treasury rates in February-2015 and are now at a cyclical inflection point in the bond market.

Technical analysis of a quarterly chart comparing the price performance relationship between 10-Year rates ($TNX) and Long-term Treasury Bonds ETF (TLT) suggest a high probability in the future underperformance of bonds as an asset class and that the natural order of the economic business cycle remains intact. It also reveals that the astute money continues to exit this area of the market while time still remains to do so in an orderly fashion. Besides that, the Fed Reserve has been forewarning investors as well.

Stay Hillbent for the Market Direction and if you are the last to leave, please don’t forget to turn off the lights.


quarterly chart of 10-year treasury rates vs 20 year plus treasury ETFs
Click here to enlarge


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