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U.S. Treasury Bonds Look Attractive

Interest-Rates / US Bonds Jun 24, 2010 - 08:11 AM GMT

By: Guy_Lerner

Interest-Rates

Best Financial Markets Analysis ArticleThere are two trades in this market: the risk trade and the non-risk trade. The risk trade is in equities and all the other assets, like commodities, real estate and emerging markets, that have become highly correlated to equities. The non-risk trade is in bonds. This works when equities don't. With the bounce in equities sputtering (but not having rolled over yet), Treasury bonds are looking attractive.


After much struggle and angst, I managed to get the "call" in Treasury bonds correct. This appears to be a secular, sustainable move towards lower yields or higher bond prices. Long term Treasury bonds have been consolidating that initial move over the past 6 to 7 weeks, and they appear to be breaking out again.

So why do I think long term Treasury bonds are going higher? Look at a daily chart (see figure 1) of the Ultra Short 20 + Year Treasury ProShares (symbol: TBT). This is a 2x leveraged ETF product that tracks inversely to the daily performance of the Barclays Capital 20+ Year U.S. Treasury index. The black dots are key pivot points, and TBT is breaking below a key pivot point (i.e., support level) in an established down trend. This is bearish for TBT, which is bullish for bonds.

Figure 1. TBT/ daily

Figure 2 is a daily chart of the i-Shares Lehman 20 + Year Treasury Bond Fund (symbol: TLT). This ETF tracks the Barclays Capital 20+ Year U.S. Treasury index. The indicator in the lower panel is the on balance volume indicator with a 40 day moving average, and TLT is under accumulation. The black dots are normal pivot points, and these show a series of higher lows, which is bullish.

Figure 2. TLT/ daily

This week the equity markets are looking a little "stressed". Within the context of a possible failed signal in equities, Treasury bonds are starting to look attractive once again.

By Guy Lerner

http://thetechnicaltakedotcom.blogspot.com/

Guy M. Lerner, MD is the founder of ARL Advisers, LLC and managing partner of ARL Investment Partners, L.P. Dr. Lerner utilizes a research driven approach to determine those factors which lead to sustainable moves in the markets. He has developed many proprietary tools and trading models in his quest to outperform. Over the past four years, Lerner has shared his innovative approach with the readers of RealMoney.com and TheStreet.com as a featured columnist. He has been a regular guest on the Money Man Radio Show, DEX-TV, routinely published in the some of the most widely-read financial publications and has been a marquee speaker at financial seminars around the world.

© 2010 Copyright Guy Lerner - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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