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The Bond Market Knives Come Out

From the Desk of Ian Culley @IanCulley

No matter how you slice it, bonds are stuck in a downtrend.

Perhaps bonds are carving out a tradeable low. If so, we have our levels to trade against. But price is falling away from our entry orders, heading in the opposite direction.    

You just can’t buy long-dated U.S. Treasuries right now…

Check out the U.S. T-Bond ETF $TLT:

TLT is trading beneath a downward-sloping long-term (forty-week) moving average and a yearlong downtrend line. Long-term averages and trendlines epitomize the Keep It Simple Stupid (KISS) approach to trend analysis because they work.

We can also add a well-defined bearish momentum regime on the 14-week RSI to our bearish data point list. The lackadaisical bid for bonds reminds us that it’s far easier for an asset to fall on weak demand than to rise on dwindling supply. 

During last week’s Portfolio Accelerator in Sonoma, we discussed easing demand for long-duration U.S. Treasuries. Like most good conversations, questions outweighed answers. 

Meanwhile, the bond market crash continues. Nobody wants to buy U.S. Treasuries further out on the curve as the eight-week T-Bill yields 5.27%.

That could change, of course. But buying bonds has proven to be a painful endeavor as buyers limp to the side. 

I prefer to spend time and energy on better opportunities.

What about you?


Countdown to FOMC

The market is pricing the probability of the first 25-basis-point rate cut at the September meeting.

Here are the target rate probabilities based on fed funds futures:

Click the table to enlarge the view.

This data is from the CME FedWatch Tool as of May 30, 2024.

Thanks for reading.

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The post The Bond Market Knives Come Out appeared first on All Star Charts.

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