This Tuesday at 11:18 A.M., I sent an email to some colleagues with a subject line of "bond bounce over?" Here are a couple of excerpts:
"The bonds are getting whacked hard today, with the long bond recently down 15/32. I believe we have seen the end of the counter-trend rally off the low from several weeks ago."
"On a yield basis, here is a chart of the 10-year note. That blue line represents a weekly downtrend dating all the way back to 1994. We broke above it, pulled back to "test" that breakout, and I believe we’re going to shoot higher from here."
"Look for 5.5% on the 10-year Note in the coming weeks. Then I’ll reassess."
I've included an updated version of the chart I referenced. So far, so good, with the bonds having another nasty day today (long bond futures prices were recently off 24/32).
What might change my mind about the short-term direction of rates? Nasty employment data tomorrow, for one thing. Another subprime-fueled hedge fund meltdown, for another. But I think that over the intermediate-term, we're likely to see bond yields rise and bond prices fall due to rising global interest rates, relatively strong global economic growth, and still-elevated inflation pressures. As always, we'll see ...