Bond Market

[jonnyfrank]

What are your thoughts on these thoughts about bonds? Read bottom page first....the order of the pages got wanky on me....

[MarkD]

Confirms my perspective with one exception. As Sol and others have stated, once folks recognize the move in bonds is up, tech stocks which are flush with cash and cash flow will follow and overtake before you can say Quantity Tightening = Quantitative Easing.

[Yodean]

What are your thoughts on these thoughts about bonds? Read bottom page first....the order of the pages got wanky on me....

U.S. bonds will be fine in the intermediate to long-term. I'm pretty bullish on them in those time frames. The worse things get in Western Europe (they will get worse), the more capital will flow to U.S. capital markets, including bonds and blue chips.

If one views U.S. bonds as "delayed dollars," bonds should eventually follow the USD's recent run to the upside.

The Fed and those behind it will intervene much more forcefully if credit markets seize up, including bond markets.

People probably remember that Powell did a big dovish pivot in late '18 when the S&P had dropped about 20%, and stopped QT, but that's not really what happened.

Or rather, what was more important at that time was that liquidity dried up (the junk bond markets weren't moving, etc.) and credit markets looked threatened.

That's one of the signals I am monitoring, for the eventual Fed pivot - how liquid and flowing the credit and junk bond markets are (e.g. widening ask-bid spreads, etc.). If they seize up, the Fed will likely pivot.

Financially, I view almost everything in the markets as subservient to the ultimate war - the War Of Currencies (WOC) - the USD is in the fight of its life as the global reserve currency.

Rumours of its imminent demise are largely exaggerated - King USD is still winning.

So the Fed isn't going to let the U.S. bond markets fail, as the latter is part of maintaining USD hegemony.

All will continue to bend the knee to the USD.

[Yodean]

Pretty strong close for TLT. Early days, of course.

On a day when Fed hikes 75 bp, one would normally have expected TLT to go down hard. It didn't, so this could be viewed as a positive divergence, at least in the very short-term.

Positive RSI divergences on dailies and weeklies, as well as daily MACDs.

Could just be a technical bounce, but my base case is that TLT will likely consolidate around current levels before rallying.

[SOL]

Pretty strong close for TLT. Early days, of course.

On a day when Fed hikes 75 bp, one would normally have expected TLT to go down hard. It didn't, so this could be viewed as a positive divergence, at least in the very short-term.

Positive RSI divergences on dailies and weeklies, as well as daily MACDs.

Could just be a technical bounce, but my base case is that TLT will likely consolidate around current levels before rallying.

The federal funds rate is roughly 1.63, and interest rates are roughly 1.75. Interesting divergence Federal funds rates were higher in 2018 than today. One offshoot is that banks are borrowing money on the cheap and making even more via mortgages. They should not be allowed to charge more than 50 basis points. However another possible development is that the mortgage markets think the outlook is a lot worse than it is, hence the wide gap

[nicolas]

Pretty strong close for TLT. Early days, of course.

On a day when Fed hikes 75 bp, one would normally have expected TLT to go down hard. It didn't, so this could be viewed as a positive divergence, at least in the very short-term.

Sell the rumor, buy the news!