What About Bond Futures

Treasury Bond Futures just hit a very interesting point.

Treasury Bond Futures broke a 40 year bullish channel in 2022. At the time I noted that this is the start of a Secular Bear market for Bonds and that there were consequences to that. One of those consequences is that there were only a handful of investors alive that traded markets before this bull market started in 1981.

Obviously then, nobody had the playbook on the shelf for bonds now. We also saw those that we had elevated to guru status (Bill Gross, Jeffrey Gundlach…) seem to suddenly look more like normal investors. But the influence of the bond market was felt on the economy, commodities and equities as well during that bull run.

This was the warning that I was focused on. Long time economists and strategists in the private sector and maybe more importantly, the public sector (the Government employs 26-29% of all economists according to the BLS) had to learn a new environment on the fly. Bottom line in my view is that you cannot rely on anyone to know what will happen as a result of a prolonged bear market in bonds.

The chart above shows the 3 month bars of bond futures prices since their inception with the August 1977 contract. What I see here is a 41 year channel break that had an initial leg down that was consolidating over support. That support has now given way to a renewed move lower. Prices have now retraced 61.8% of the bull run, a key Fibonacci level, so a bounce here would not be a surprise. Certainly the momentum as reflected by the RSI and MACD do nothing to suggest that you anticipate that though.

original Substack link

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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