September 10, 2013 at 16:15 PM EDT
Is The U.S. Treasury Secular Bond Bull Market Dead?
NYSEARCA:TBT, NYSEARCA:TLT, NYSEARCA:IEF, NYSEARCA:TBF, NYSEARCA:SHY Related posts: Sprott Asset’s John Embry: Is The Gold and Silver Secular Bull Dead? The 32-Year Bull Market In Bonds Is Officially Dead Did The Dow Begin A New Secular Bull Market At The March 2009 Low? The Great Bond Bull Market May Be Over, But The Bond Bulls Don’t Know It Yet Is The 30-Year Bond Bull Market Over?

market bondsAndrew Kassen:  By nearly all accounts, the secular bull market bonds have cycled through since the early 1980s is in its final days.

Almost too neatly, faint murmurs of an LSAP “taper” got underway in early May and quickly crescendo-ed into a ruthlessly effective catalyst for capping the generational bond rally, producing a sharp and as-yet-sustained move higher across the long end of the Treasury yield curve.

Speculation that bonds as an asset class long ago ballooned into an asset bubble is nothing new.  The grand narrative of a “Great Rotation” of capital flows out of bonds and into equities, while facile, has passed in and out of popularity depending on the vagaries of financial markets; but has lingered as a stubborn theme now for years.  It seems bonds in general – and those instruments carried in bulk on the Fed balance sheet like US Treasuries and Mortgage-Backed Securities, in particular – just needed a slight nudge to begin their long fall from the great height attained by 32 years of (generally) advancing prices.

Treasuries Rally

Though there’s been some back-and-forth on it, the September FOMC (09/17-09/18) is widely seen (including by economists at most Primary Dealers – US banks essential to the Fed’s POMO machinery) as the meeting when the taper will begin; thereby heralding the beginning of the end of the Age of Accommodation and a tightening regime that will take bond prices lower and yields higher for years to come.

But, no market turn so massive moves in a straight line.

And now on the reputed eve of the taper actually kicking in (as opposed to the months-long, “sell on rumor” front-running FI portfolio reallocation), it is with no small hint of irony that I note Treasuries look set to install a – at least – short-term rally.  If bonds continue their soundless, deafeningly persistent mockery of the Bernanke Fed’s intellectual policy orthodoxy, that rally would begin sometime in the next couple weeks.

As improbable as it may seem, a “buy the news” US Treasuries rally – September FOMC taper announcement or not – may be right around the corner.

On the heels of the real Summer Swoon (in bonds this year), buying US Treasuries in expectation of a bounce is not something done casually (to be clear, I’m not recommending that – or anything else – here).  Indeed, the more volatile medium-to-long-dated side of the curve – 10-30 years out – looks like a razor-honed falling knife ready to cleave away the sinew and bone of anyone daring to go long.

Now with that dire preface out of the way, let’s flip through a series of charts concentrating on the 10 year T-Note (ZN; and TNX for yield) and 30 year T-Bond (ZB; and TYX for yield) that may suggest a contrarian willingness to take that dare is well-placed.

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Related posts:

  1. Sprott Asset’s John Embry: Is The Gold and Silver Secular Bull Dead?
  2. The 32-Year Bull Market In Bonds Is Officially Dead
  3. Did The Dow Begin A New Secular Bull Market At The March 2009 Low?
  4. The Great Bond Bull Market May Be Over, But The Bond Bulls Don’t Know It Yet
  5. Is The 30-Year Bond Bull Market Over?

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