We won’t even try to count the number of times we’ve started get excited about the prospect of a bear market in bonds (rates higher, bonds lower). We just can’t help ourselves – a sustained downward trend in the market combined with higher T-bond yields would provide an excellent opportunity for managed futures to prosper. Over the last couple of years we’ve watched each move lower with hopes that it might be the start of the long-term trend we’ve been waiting for (see here, here, and here for starters).
But yesterday’s move was particularly exciting; it wasn’t just any down day for US Treasuries. Bespoke Investment Group pointed out that it was the largest single-day decline for the US long bond futures contract since October of 2011, while the yield increase for the 10 Year was the 4th largest in the last 50 years. On track to fall for the 5th week in a row, long bond futures briefly traded at a new 2013 low before bouncing back somewhat today:
Chart courtesy Finviz.com. Disclaimer: past performance is not necessarily indicative of future results.
With all the recent talk of Bernanke eventually “tapering” the Fed’s QE purchases, and the broader market no longer appearing to hang on his every word, we might finally be nearing the point at which rates are allowed to rise, and the 30+ bond bull comes to an end. And if not this time… then maybe next time.
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