Now, Chinese government bonds are pressing toward fresh lows.
Sovereign debt epitomizes downside risk. And Chinese bonds are on the cusp of a significant breakdown – a breakdown that spells more trouble for global bond investors.
Check out the VanEck China Bond ETF $CBON:
CBON aims to track the ChinaBond China High Quality Index (debt mainly issued by the People’s Bank of China). And like US treasuries, Chinese government bonds are flirting with fresh multi-year lows.
US Treasuries have stopped falling – for the moment.
But it’s a mixed bag.
Short setups for long-duration bonds remain in play despite pullbacks underway, while the shorter end of the curve never managed to break down.
It’s messy.
So, let’s run through the US Treasury futures for an updated read on the bond market.
First up is the 30-year T-bond:
The 30-year has broken below a shelf of former lows at approximately 123. It’s a short as long as it’s below that level with a measured target of 113’15.
But the 30-year is finding support at last year’s lows, bouncing higher toward our line in the sand.
Are investors really buying bonds, betting on a squeeze higher?
Perhaps it’s just my Twitter feed. (Or are we calling it "X" now?)
I’m perplexed by the growing chatter around picking the bottom in bonds.
Warning: Picking bottoms is never a good look.
It’s unbecoming, especially when there are zero signs of a reversal. (The same applies to tops.)
I understand the Nasdaq 100 had its best first half – like, ever.
But what does that have to do with yield charts?
Rates continue to rise worldwide.
Here’s a look at Germany, France, Portugal, and US benchmark rates:
All are steadily grinding higher following explosive advances last year. Yet none have decisively resolved to the upside from their respective multi-month ranges.
I’ve parroted my bond outlook during internal meetings and across our Slack channels in recent weeks, partly in jest but mostly to highlight the underlying uptrend in rates.
Honestly, I’m not crazy about selling the short end of the curve, though I believe there’s a trade there.
Instead, there are far better opportunities with longer-duration bonds.
Shorting bonds isn’t the most popular play with the Fed and the dollar and the CPI…
But that makes me like this trade even more, especially when I put the headlines and the dominant narrative aside and simply focus on the charts…