Thursday, April 30, 2015

Bond Market Carnage

It looks like the panic move ahead of the 25 bp Fed rate hike is providing a sneak preview.  I don't think this is the move that takes the 10 year yields to 2.30%, but we are probably going to test that 2.12 to 2.15% range that marked the top for yields for most of February and early March (except for that panic spike on nonfarm payrolls on March 6).

The bond market is taking control, as equities cannot rally when yields are higher.  It tells you how much this market is dependent on zero rates to fuel the rally.  Just like on that nonfarm payrolls day on March 6th when bonds and equities both went down hard, we are getting another one of those moves.

I will be buying dips in Treasuries for the next several days, I believe this move is temporary and is not the start of a bigger move as some fear.  That bigger move should not be far away though, probably starting in the summer.

P.S. - There is strong support for the German Bund at 0.40%, and usually when Bill Gross goes on TV to pound the table on the trade, usually he is trying to dump it.  I am sure he's already out of his short Bund calls position.


Ivanovich71 said...

Can you reconcile this post with the one you made April 3 "Raging Bond Bull"? Am curious if your position has just been delayed or shifted entirely.

Market Owl said...

No shift in position, it is a long term bull market in bonds. This is a short term correction in that trend. There is no shift in my long term bond bull thesis. Short term, we may go a bit lower, but these are good prices to get long bonds.

Ivanovich71 said...

Thanks for the answer!