I follow long bonds very closely as they play a role in assessing risk within our various market indicators. I do this by using the 20+ Year Treasury Bond ETF (TLT) as our proxy.
Long bonds (TLT) could be ready to rally closer to 102 as the big test at around 92 held-this means that:
- The market anticipates softer yields.
- The market at least feels that the rates have peaked unless we see a huge spike in inflation.
- The market may not like it if yields get too soft. It could very well have a negative impact with signs of:
- – risk off
- – recession
- – stagflation
Junk bonds (JNK) on the other hand, are holding up which is solid reason to believe risk on remains for now and dips are buy opportunities.
Until the relationships change (junk underperforms long bonds or SPY underperforms long bonds) we are not concerned too much about the solidity of the market.
Nonetheless, signs are beginning to appear, which should not be ignored.
TLT price cleared over the 50 and 200 daily moving averages and is set to confirm a phase change.
TLT peaked its head above SPY and is not outperforming.
Momentum is also improving, clearing the resistance going back since early February.
This is not the first time TLT has rallied since the end of December 2023.
In fact, it is the 3rd time.
Will the 3rd time be the charm?
Charm for long bonds, but probably not so charming for equities as fear (just look at gold) can start to take over.
Twitter: @marketminute
The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.
