A Recognized Top in US Long Bonds Will Be A Process

A recognized top in US Long bonds, the last golden pillar, will be an ongoing process - an ebb and flow between in and outflows (see bond diffusion index below) rather than a single exogenous event. The bond market through the aid of QE1,2,3,etc will provide support at critical junctures until it (they) no longer stem the decay.



US Treasury Bond 20YR+ (TLT) And Bond Diffusion Index (DI):


While the long-term nominal trend remains in tact, it ignores that fact that real (constant currency) prices peaked years ago. In other words, the canary in the coal mine used to warn miners and investors died in 2002.

Long-Term U.S. Government Bonds Total Return Index (LTGBTRI):


Long-Term U.S. Government Bonds Total Return Index (LTGBTRI) to Gold Ratio:


Smart money knows that another transition from the public to private sector began in 2009.

Long-Term U.S. Corporate Bonds Total Return Index (LTCBTRI) to Long-Term U.S. Government Bonds Total Return Index (LTGBTRI)


Tim makes some interesting observations...

Hi Eric,

US Long Bonds


Wanted to show you an example of a time / price chart. This is my original work. Friday's move in the long bond has great significance I think. I believe you follow bonds also, and I'd like to see one of your ratio charts on the long bond now we have our breakout.

The long bond has consolidated enough time to bring back it back to balance it's countermove downward (a mirror foldback). The move up should show us the length of the consolidation to equal the height of the upward move. Not much interpretation here, just the way markets establish balance over time.

With the higher rates, this will put pressure on JPM's & the FED's balance sheet as their interest rate swaps & POMO purchases put them greatly underwater. It will be interesting to see how these factors play out in the days ahead.

Regards,

Tim