QuantitativeExhaustion
Long

31 Year US Bearish Bond Yields Coming to an End

INDEX:TNX   10-Year Treasury Note
There are many reasons why bond yields should go down, however, there are many more positive reasons why bond yields will go higher.

Demographically Challenged

Our largest demographic population on the planet, not just in the US, is the baby boomers born 1944 to 1964. Largely early baby boomers born during WWII and up to the late 1940's have already started collecting on retirements. For these seniors to live comfortably in retirement they will need to draw down on a steady income derived from higher US Bonds yields. Boomers can no longer afford to risk money in equity markets, they will be forced to invest conservative in fixed incomes.


US Political Movement

For more than 30 years the US has run up debts with both political parties at fault. However, more recently we are seeing a shift towards a popular following of younger fiscal conservatives in the Republican party. Many of these fiscal conservatives candidates govern states and have taken on the challenge of run away debt spending. Fiscal Conservatism will also appeal to the US largest voting class, baby boomers. Baby boomers are fully aware that more debts equals more instability in the US, and want to see a more fiscal responsible governments. To appease the baby boomers wishes, whoever it is that leads the US, they will implement a strategy of spending cuts and debt reductions. Spending cuts and debt reductions will also help US Treasury Yields increase.

Federal Reserve Raising Rates

Our own Federal Reserve has been sounding off the warning now for almost a year, it's only a matter of time before Janet Yellen starts raising benchmark rates. Although US economy has entered another soft patch, which will require the Fed to talk down the rate increase in 2015. However, sometime in 2016 we will see our first rate increase in the US. I expect other countries like Great Britain to follow this trend of rate increases.
kate25 PRO
2 years ago
HI Jr - I like to try and tear this chart down - three time frames
snapshot
+4 Reply
kate25 PRO
2 years ago
This is 20 20 hind sight - so daily next
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jangseohee
2 years ago
snapshot
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kate25 PRO jangseohee
2 years ago
I wish I had a 4hr TF to break this down into
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QuantitativeExhaustion PRO jangseohee
2 years ago
So you guys are anticipating the bullish move now not months later?
+2 Reply
jangseohee QuantitativeExhaustion
2 years ago
with such a persistent downtrend, I remain conservative until the price make a HH taken out previous swing high
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kate25 PRO
2 years ago
this is convoluted I know - but it needed to be added on the weekly
snapshot
+4 Reply
We could very well hold constant in the area you are suggesting. I does look like 1.85 on 10 year is a key area to form support if the bull trend is to ignite. However, I have my doubts. Looks like our economy is slowing once again and will require the Fed to start sounding dovish again until we resume some sort of growth.
+2 Reply
jangseohee
2 years ago
JR, i reckon the only country to take the lead in interest rate hike will be no other than - US
and then the rest will follow suit
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kate25 PRO jangseohee
2 years ago
you are anticipating pivot low
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kate25 PRO kate25
2 years ago
on the monthly - mid pivot low
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jangseohee kate25
2 years ago
kate25, that coincides with monthly pivot low?
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kate25 PRO
2 years ago
price should be supported by pivot low - however new demand formed below in yellow box - cross below pivot low then above should break supply area in green
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JR I just wanted to see if my SD charts came close to yours - hope you are not insulted by my posting
+4 Reply
I have a bearish bias short term (next 12 months) and do believe we will challenge the 10 year 1.65 low.
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kate25 PRO
2 years ago
Monthly trend with demand just below it and the monthly pivot
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- I think it will reach for demand
+3 Reply
So your short term time frame calculation looking for test of demand 1.85/1.90 and bounces in a zone towards 2.30/2.40?
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kate25 PRO QuantitativeExhaustion
2 years ago
I think JR the first order of business for this index to climb will be to see if the new demand area holds - it is a SD chart -so I would be looking for explosive movements away from demand targeting and breaking supply areas directly to the left - so 1.98 target down - targeting 2.50 up
+4 Reply
It's probably going to get very volatile as we approach the date most people have pinned as most likely date of a rate hike, and that's the September Fed meeting.
+1 Reply
KingTraderXXIII
2 years ago
Cant wait.
+2 Reply
LazyBear PRO
2 years ago
This is another view of the data. Analyzing 1/x of any instrument helps to get new perspectives (& sometimes remove biases). As you can see 1/x is going down (meaning, TNX may defn bounce*). Limits are shown by the upchannel 1/x is in.

snapshot


* just based on chart, no fundamentals considered.

+3 Reply
QuantitativeExhaustion PRO LazyBear
2 years ago
It's always a good idea to put some constructive thought towards fundamentals to get an idea where price will move in the future. If the largest bond holder in the world has the capability to move yields in a direction, and is committed to do so, I would follow that direction.
+2 Reply
QuantitativeExhaustion PRO LazyBear
2 years ago
I hear the Federal Reserve wants to move rates higher, which would agree to your inverse chart, however they themselves remain cautious. So if September passes and we get no rate hike, that could mean bond yields driving lower. That would allow us an opportunity to re-short TLT after September Fed meeting.
+2 Reply
JigneshRathod
2 years ago
what ETF we can play which run with TNX? is ther any 2X/3X ETFs / ETN avaialble to trade?
+2 Reply
jangseohee JigneshRathod
2 years ago
TYD = Daily 7-10 Year Treasury Bull 3x Shares
TYO = Daily 7-10 Year Treasury Bear 3x Shares

For more information: refer to Direxion ETF 2x/3x leverages
+2 Reply
QuantitativeExhaustion PRO JigneshRathod
2 years ago
TLT is used by many option investors. TLT is 20+ year US bonds, which moves inverse of yields. If you believe bond yields will go up you can buy TLT puts or if down TLT calls.
+2 Reply
JigneshRathod QuantitativeExhaustion
2 years ago
I think TLT is bullish and TBT is bearish ETF. You mentioned opposite.
+1 Reply
QuantitativeExhaustion PRO JigneshRathod
2 years ago
No i stated the correct answer. Yields go up TLT goes down, yields go down TLT goes up. That's really not up for argument.

What you might misinterpret is the TLT put if yields go up statement. Puts are option contracts that take advantage of price going lower. In this case if there is an expectation of yields going up TLT will go down, so one would buy Puts.
+2 Reply
QuantitativeExhaustion PRO JigneshRathod
2 years ago
Also, TBT has very little option interest, so it's best to stick with TLT calls/puts.
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CoopsCharting
2 years ago
It is not wise to assume interest rates will go back to where they were 30 years ago. There was mass inflation in the 70's...partly because the gold standard was removed, therefore high inflation and a high fed rate response. It was a one time event. Since we now have a fiat currency and globalization of information (i.e. consumer knowledge and ability to order from the other side of the world creates downward pressure on inflation) I predict a prolonged low inflation era. Of course if the minimum wage is raised more quickly than it should be and the fed decides they want to create artificial inflation by printing money then all bets are off. How did that work out 1930s Germany....yea thought so.
+2 Reply
QuantitativeExhaustion PRO CoopsCharting
2 years ago
This chart does not suggest that interest rates will rise to where they were back in 1970's or early in 1980's. Our only presumption is demographics money management shifts and Federal Reserve actions will cause 10 year interest rates to rise 4 to 6.5% level.
+2 Reply
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