From the Desk of Ian Culley @Ianculley

Bonds have endured quite the year.

Perhaps 2022 marks the worst on record, or at least the past 100 years. Nevertheless, we’ve all witnessed extraordinary selling pressure in what has historically acted as a safe-haven asset. 

Despite the dismal returns and destruction of the traditional 60/40 portfolio, the bond market continues to instill valuable lessons in those willing to listen and learn.

Check out these three poignant reminders courtesy of the bond market…

Trends Persist

It’s an oldie but a goodie. And interest rates have refused to let us forget that trends persist.

The chart below highlights the five-, 10-, and 30-year US Treasury yields finding support at their respective year-to-date trendlines and pivot highs from the spring.

From the desk of Steve Strazza @Sstrazza

Tuesday night we held our December Monthly Conference Call, which Premium Members can access and rewatch here.

In this post, we’ll do our best to summarize it by highlighting five of the most important charts and/or themes we covered, along with commentary on each

Let’s get right into it!

This is the video recording of the December 2022 Mid-month Conference Call.

We discussed:

It's the weekly bond market edition of What the FICC?

Today we're highlighting the breakout in bonds.

Check it out!

From the Desk of Ian Culley @Ianculley  

"Trade what’s in front of you."

We say it all the time.  And it sounds simple enough.

But, with an immense amount of information circulating, it can be difficult to distinguish what’s important. 

That’s why we focus on price. Price filters the noise and useless data.

At the end of the day, it's price that pays. 

So, if bonds are breaking out to fresh multi-month highs, we should buy bonds, right?

Here’s a quick look at the bond market buy signals triggered earlier in the month: 

All three are still in play.

From the desk of Steve Strazza @Sstrazza

We held our December Monthly Strategy Session last week. Premium Members can access and rewatch it here.

Non-members can get a quick recap of the call simply by reading this post each month.

By focusing on long-term, monthly charts, the idea is to take a step back and put things into the context of their structural trends. This is easily one of our most valuable exercises as it forces us to put aside the day-to-day noise and simply examine markets from a “big-picture” point of view.

With that as our backdrop, let’s dive right in and discuss three of the most important charts and/or themes from this month’s call.

From the Desk of Ian Culley @Ianculley

Bonds are flying under the radar.

While everyone focuses on the S&P 500 finding resistance at its 200-day moving average, bonds are posting their most substantial rally since the early 2020 peak.

Treasuries have represented downside risk for almost two years. We get it. Nobody's wanted bonds!

Neither have we – until now.

Here’s why…

Momentum

The long-term Treasury bond ETF $TLT has gained almost 20% since late October. In the process, it registered its largest four-week rate of change in a decade (aside from the covid related volatility).

This is what a momentum thrust looks like:

Notice the previous rallies in mid-2021 and earlier this summer (highlighted in yellow).

This is the video recording of our December 5th Monthly Charts Live Strategy Session

It's the weekly bond market edition of What the FICC?

Today we're tracking European yields for insight into the next big move in US interest rates.

Check it out!

From the Desk of Ian Culley @Ianculley

The strong US dollar and higher interest rates have dominated the conversation this year.

But the direction of the US Dollar Index $DXY has changed, breaking its year-to-date trendline earlier this month. 

Will interest rates follow?

Not yet! So far, the uptrend remains intact for the five-, 10-, and 30-year yields. We have to give these trends the benefit of the doubt, for now.

Despite their persistence, it seems more a matter of when not if rates do eventually roll over.

Based on information from the US bond market and developed-market European yields, it could happen sooner than you might expect.

Let’s break it down.

First, we can’t dismiss the middle-long end of the curve holding above year-to-date trendlines.