Bond rally nearing an end?

[Lance Carson]

IMHO,Bonds are heading down from here ( correction and stop loss cleaning up), guaranteed. Not all gaps get filled. The 4.80 yield will be tested again before the next leg up to 116-00. Need to see a close above 114-00.The key number is 114-10 otherwise is rangebound till next Payroll report. See you at the top

And remember the trend is up till the Fed starts lowering rates.

 

[johnpinochet]

Quote from johnpinochet:

I found Monday's activity to be quite interesting. Per my journal I only trade intraday, and my long term predictions could probably be used as a contrary indicator, however, I found something very interesting today with price behaviour between 0830 and 0900 CST.

I shorted from the open based on my approach detailed in my journal. Later, when prices failed to approach or break the 112 22 low, I took a look at the hourly chart and realized something. I saw the structure of the movement that was established roughly 30 days ago. The interesting thing was it didn't matter how I wanted to label or count this structure. If 112 22 wasn't violated then we were going up, and up dramatically from there. If it was violated then my observation would be incorrect on the up move, and I would simply maintain my short.

In any event, here is my long term prediction. Prior to visiting 112 22 again, we will hit 115 00 or 115 19.

Keep in mind that I won't trade the above. I only trade the bonds intraday.

Can you let me off the hook as we hit 114 29? Waiting for a kiss of 115 00 is killing me.

 

[Surdo]

Someone love's to toot their own horn!

el surdo

 

[JohnL111]

Hey mcurto...

Seems like some rather determined sellers on the long end today are really steeping the curve. You can clearly see it in deferred EDs (red vs green). Also, the 2-10 swap spread has recently been slightly negative (which is rare!). So is the market saying the long-end has run to far in front of the Fed?

 

[drsteph]

So guys, the way things are behaving today, are we starting to think that this is the turning point for the 30?

 

[Lance Carson]

No new buyers in the 30yr with the Dow down more than 100? The ZB should be testing the high by now.Doesn't look good
( maybe is the big divergence in the ZB- 60 min developing) The Asians most be saying: look at those fools buying at that level !

 

[dhpar]

Quote from Lance Carson:

No new buyers in the 30yr with the Dow down more than 100? The ZB should be testing the high by now.Doesn't look good
( maybe is the big divergence in the ZB- 60 min developing) The Asians most be saying: look at those fools buying at that level !

agree. still I am a little bit surprised that we could attack levels of today's close - and so fast. This applies especially to ED and FF markets..... any insights?

 

[dhpar]

by the way, quite a selling preassure into the weekend... - does not look very good for the next week...it could be again rock'n'roll...

 

[JohnL111]

I wonder if the long-end under-performance is related to the dollar? Very interesting that the worst performing Asian stock market last week was HK (currency pegged to USD) while the best performing was Japan. Since global inflation is on the rise, the dollar should be weak given our deficits. The Chinese may feel the inflation pain themselves by adjusting the RMB too slowly. [But, I really can’t blame them since a quick revaluation would probably nuke the economy.]

So if the Asians accept that the dollar fall can be managed (more fiscal stimulation??) as long as European/Japanese demand for goods can pick up some of the slack, where does that leave the US bond market? Not in a good situation.

That’s my probably worthless take on last week.

 

[scriabinop23]

Quote from JohnL111:


So if the Asians accept that the dollar fall can be managed (more fiscal stimulation??) as long as European/Japanese demand for goods can pick up some of the slack, where does that leave the US bond market? Not in a good situation.

That’s my probably worthless take on last week.

I had much the same thought. Devaluing dollar is holding the bond market down.

Interestingly enough the bond market is anticipating a drop in rates just as the currencies are, fueling this dollar devaluation. For the same reason, I'd imagine big players seeing this don't know which direction to go -- 1) falling currency value should raise foreign buying power (for those hunting for yield) [resulting in buying pressure], 2) speculation that the fed must eventually do something [or nothing, meaning -not- change rates] to curb dollar losses results in selling pressure.

Furthermore, if market players are expecting the dollar to rebound and strengthen, wouldn't this bond market move even further north?

This points to a further weakening dollar. Perhaps bonds aren't going much higher with conviction because too much currency risk viewed from foreign buyers?

If I had to bet money, I'd say the fed will do nothing to overnight rates in first half 07, the dollar will continue to slide, commodities will continue booming, and the economy will fall into recession. The fed won't be able to go either direction (raising rates will hurt economy and particularly housing too much, and lowering rates will force the dollar to slide even more and continue to exacerbate the commodity driven inflation).

If the fed proactively defended the dollar, I'd be impressed, but I fundamentally believe their first priority is to prevent a housing and debt collapse at any expense.