Bonds Peaking, Interest Rates Bottoming?
Chris Kimble | Jun 11, 2019 12:01AM ET
This chart looks at the yield on the 10-year note on a weekly basis. Interest rates look to have peaked last October. Since hitting those highs, yields have declined 35%.
This large decline has them testing the 2017 lows and its 61% retracement level of the 2016 lows/2018 highs at (1). While testing the support level, momentum is now deeply oversold, hitting the lowest levels in the past couple of years.
Has the decline in yields/rally in bonds created an extreme in sentiment? Yes!
This chart comes from Sentimentrader . It reflects that many investors are bullish bonds (nearly 72% bulls). When rates were hitting highs/bond lows in October of 2018, only 20% of investors were bullish bonds. The majority were wrong last fall. Will they be wrong again?
Are interest rates bottoming/bonds topping at current levels at (1) in the top chart? Very possible. At the very least, a short-term rally in yields/bond decline is due.
If yields continue to fall and break support at (2), they would be suggesting the economy is most likely going to slow down. If yields would happen to rally, lagging bank stocks might catch a bid. This looks to be an important inflection point for yields, bonds and stocks.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.