Over the past few days, the narration around Bonds has really caught on. With bond yields across the globe recovering sharply from lows, there are a lot of questions about the current stock market rally, the impact of bonds on the bull-run, whether we should prepare for a sell-off etc.
Let’s try and address some concerns through this post where we talk about the impact of bonds and the US dollar on the ongoing stock market rally.
Let’s assume we know nothing about the correlations in the market and are basing our view on the simple activity of observing the historical price action and its subsequent impact.
Here we have India’s 10-year Government Bond. When we look at the extremes of the movement, which comprises of the high and low clocked in the 2008 crash, the range lies between 9.30-5.25. Since then for 12 years, the range hasn’t been breached and if this was any other chart with the name stricken out, one would say it’s going sideways.
In the chart below, we have highlighted three instances where the bond yield has bottomed out and rallied. This has happened in 2009 and 2017 in the past. Can we expect the same in 2021?
Let’s look at some more charts.
Click on chart to enlarge view.
To access our team’s Technical Analysis, you must be a premium member of All Star Charts India. Please login below or start your risk-free 30 day trial today.
Lost Password?