Is This 30-Year Bond Trend About To Reverse?
Dragonfly Capital | Sep 26, 2018 10:00AM ET
Treasury Bonds have been around for ever. And for as long as any active investor has been alive and allocating capital they have been going up in price. That may be about to change though. The chart below shows a rising channel in 30-year Bond prices. It goes back to 1998 but the channel extends back well into the 1980’s. And there are some interesting things going on in this chart right now.
For the first time, the price of bonds has fallen below both the rising trend line that has acted as support and the 100 month SMA. What looks like a little leak out of the channel could be the start of a new chapter in the life of Bonds. The trend that has been in place for 30 years may be changing.
With just 3 days left in the month, this could be the start of a new trend, to the downside. And Wednesday may be the catalyst. The FOMC meeting ending today is expected to result in an announcement to raise short term rates another 25 bp, to a range of 2.00% to 2.25%. That is fully priced into the markets. What they say beyond that is what could be the catalyst.
More rate hikes are expected, but raising the end target above market expectations could start the ball rolling down hill for Bond prices. For long term investors, it would still take a big move to confirm a reversal in trend in Bond (via iShares 20+ Year Treasury Bond (NASDAQ:TLT)) prices. A drop below the 2014 low would qualify. For shorter term traders the price has been in a sideways channel since the January market highs.
A drop below that channel would gather Bond sellers. That could be the start of a steam roller effect barreling lower as moves by short term traders then trigger intermediate traders to sell and that 2014 level gets closer. There is not a full blow sell off in Bonds yet. But the scenario for it to happen is getting closer.
DISCLAIMER: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
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