What’s Going on in Bonds?

Bonds have not been doing much at all in 2017 …

30-Yr US Treasury Yields – Weekly Chart

The high in yields came in about 3.20% and the low of the yearly range at about 2.60%.  We have spent the better part of the last 6-months in about a 20bps range – like watching paint dry.

30-Yr US Treasury Futures Contract – Weekly Chart

The weekly chart for the 30-yr futures contract has painted 6 yellow warning candles in-a-row here … things are getting unsustainable, and maybe we get some fireworks in bonds to coincide with a little pullback in equities in the new year?   Nah … not possible, right?  Didn’t think so.

20-Yr+ US Bond ETF (TLT) – Weekly Chart #1

The TLT is not quite as tightly wound as the futures contract, but it looks even more like it wants to break higher than even the futures contract does.

20-Yr+ US Bond ETF (TLT) – Weekly Chart #2

The downward broadening pattern for the weekly chart in the TLT shows us that a potential big trend reversal could be close at hand if the upper resistance line can get taken out … could that be one of the bigger trades for 2018 – a rally in bonds?  No one is expecting it, as everyone is betting the strengthening global economy will lead to lower bond prices.

If that is the case, why have bond yields been falling?  Must be that transient factors driving inflation measurements lower these past few months!!

Bottom Line – keep your eyes on bonds going forward here for the next couple of months.

Cheers … Leaf_West

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