Bonds Are Back

From the Desk of Ian Culley @IanCulley

US Treasuries are sticking a bullish reversal – an admirable feat following an unforgettable selloff.

If you aren’t buying bonds yet, it’s time to reconsider.

Here's the US T-Bond ETF $TLT trading above a rising 200-day moving average as it violates a multi-year downtrend line:

These are the early signs of a trend reversal.

Now, bond bulls want to witness the 14-week RSI post fresh multi-year highs. (We may see such a print following today’s action.)

Heading into the close, the 30-year T-bond is registering its largest one-week rate of change since spring 2020. And on a more tactical time frame, the 14-day RSI is reaching overbought conditions. 

Both data points suggest an initiation thrust, supporting further upside for US Treasuries – a move that could last weeks or even months.

But who knows how long this bond will rally? I’m guessing months, maybe quarters, but not years.

Regardless, we have our levels to trade against. That’s what matters.

Trade what’s in front of you, follow our roadmap, and let go of any lingering recency bias. 

Bonds are back.

Are you ready?

–Ian

Countdown to FOMC

The market is pricing in three rate cuts by yearend, with the first 25-basis-point cut scheduled for the September meeting (seven weeks before the US presidential election).

Here are the target rate probabilities based on fed funds futures:

Click the table to enlarge the view.

This data is from the CME FedWatch Tool as of August 1, 2024.

Thanks for reading.

And as always, be sure to download this week’s Bond Report!