Best of the Week
Most Popular
1. Crude Oil and Water: How Climate Change is Threatening our Two Most Precious Commodities - Richard_Mills
2.The Potential $54 Trillion Cost Of The Fed's Planned Interest Rate Increases - Dan_Amerman
3.Best Cash ISA Savings for Rising UK Interest Rates and High Inflation - March 2018 - Nadeem_Walayat
4.Fed Interest Hikes, US Dollar, and Gold - Zeal_LLC
5.What Happens Next after February’s Stock Market Selloff - Troy_Bombardia
6.The 'Beast from the East' UK Extreme Snow Weather - Sheffield Day 2 - N_Walayat
7.Currencies Will Be ‘Flushed Down the Toilet’ Triggering a ‘Mad Rush into Gold’ - MoneyMetals
8.Significant Decline In Stocks On The Cards! -Enda_Glynn
9.Land Rover Discovery Sport Extreme Driving "Beast from the East" Snow Weather Test - N_Walayat
10.SILVER Large Specualtors Net Short Position 15 Year Anniversary - Clive_Maund
Last 7 days
Time To Eliminate Your Wall Street Tax? - 20th Mar 18
The Beast from the East Snow, UK Roads Driving Car Accidents - 20th Mar 18
Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - 19th Mar 18
2018 Reversal Dates for Gold, Silver and Gold Stocks - 19th Mar 18
This Tech Breakthrough Could Save The Electric Car Market - 19th Mar 18
Stocks Set to Open Lower, Should You Buy? - 19th Mar 18
The Wealth Machine That Rising Interest Rates Create Conflict With The National Debt - 19th Mar 18
Affiliate Marketing Tips and Network Recommendations - 19th Mar 18
Do Stocks Bull Market Tops Need Breadth Divergences? - 19th Mar 18
Doritos Instant £500 Win! Why Super Market Shelves are Empty - 19th Mar 18
Bonds, Inflation & the Market Amigos - 19th Mar 18
US Housing Real Estate Market and Banking Pressures Are Building - 19th Mar 18
Stock Market Bulls Last Stand? - 18th Mar 18
Putin Flip-Flops Like A Drunken Whore On Bitcoin Cryptocurrency Legalization - 18th Mar 18
How to Legally Manipulate Interest Rates - 18th Mar 18
Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - 18th Mar 18
Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - 17th Mar 18
Strong Earnings Growth is Bullish for Stocks - 17th Mar 18
The War on the Post Office - 17th Mar 18
GDX Gold Mining Stocks Fundamentals - 16th Mar 18
Nationalism, Not the Russians, got Trump Elected - 16th Mar 18
Has Bitcoin Bought It? - 16th Mar 18
Crude Oil Price – Who Wants the Triangle? - 16th Mar 18
PayPal Cease Trading Crypto Currency Bitcoin Warning Email Sophisticated Fake Scam? - 16th Mar 18
EUR/USD – Something Old, Something New and… Something Blue - 16th Mar 18
DasCoin: A 5-Minute Guide to How It Works - 15th Mar 18
Stock Market Downward Pressure Mounting - 15th Mar 18
The Stock Market Trend is Your Friend ’til the Very End - 15th Mar 18
6 Easy Ways to Get What Women Want, for Less! - 15th Mar 18
This Isn’t Your Grandfather’s (1960s) Inflation Scare - 15th Mar 18
Eye Opening Stock Market Index, Volatility, Charts and Predictions - 15th Mar 18
Gold Cup At Cheltenham – Gold Is For Winners, Not For Gamblers - 15th Mar 18
Upcoming Turnaround in Gold - 14th Mar 18
Will the Stock Market Make Another Correction this Year? - 14th Mar 18
4 Ways To Writing An Interesting Education Research Paper - 14th Mar 18
China Toward Sustainable Economic Growth - 14th Mar 18
Stock Market Direction Is No Longer Important - 14th Mar 18
Trade Tariffs Defeat Globalists and Return Prosperity - 14th Mar 18
Stock Market Crash is Underway and Cannot be Stopped! - 14th Mar 18
Are Energy Sector Stocks Bottoming? - 14th Mar 18
Nasdaq Stocks Soars to New Record High After Strong Job Reports - 14th Mar 18
Bitcoin BTCUSD Elliott Wave View Calling for Rally toward $15,000 - 13th Mar 18
Hungary’s Gold Repatriation Adds To Growing Protest Against US Dollar Hegemony - 13th Mar 18
Record Low Volatility in Precious Metals and What it Means - 13th Mar 18
Tips for Writing and Assembling the Classification Essay - 13th Mar 18
Gerald Celente "If Rates go up too High, the Economy goes Down, End of Story" - 13th Mar 18
Stock Market Selloff Showed Gold Can Reduce Portfolio Risk  - 13th Mar 18
Silver Does it Again! Severe Consequences - 12th Mar 18
Has the Stock Market Rally Run Out of Steam? - 12th Mar 18
S&P 500 at 2,800 Again, Stock Market Breakout or Fakeout? - 12th Mar 18
The No.1 Energy Stock To Buy Right Now - 12th Mar 18
What Happens Next When Stock Market Investor Sentiment is Neutral - 12th Mar 18
Economic Pressures To Driving Gold and Silver Prices Higher Long-Term - 12th Mar 18
Labour Sheffield City Councils Secret Plan to Fell 50% of Street Trees Exposed! - 12th Mar 18

Market Oracle FREE Newsletter

Urgent Stock Market Message

Bonds and Related Financial Market Indicators

Interest-Rates / International Bond Market Feb 26, 2018 - 09:40 PM GMT

By: Gary_Tanashian


The following is an excerpt from this week’s edition of Notes From the Rabbit Hole, NFTRH 488. For NFTRH bonds are not just an asset class ‘throw-in’ but instead are a key indicator set to the entire modern macro. Insofar as it may be time to use them for portfolio balance (I am currently long SHV, SHY, IEI & IEF), so much the better. Many could not wait to buy bonds during US ZIRP global NIRP operations, but today they pay better interest and have a contrarian edge with the entire herd bracing for a bear market.

We claimed appropriately bearish on bonds on December 4th, so you know this is not perma-book talking when we go the other way as yields hit our targets.

Bonds and Related Market Indicators

A subscriber asks for comment on sentiment in 1-3 year bonds and what it would take for me to “issue an all out buy signal” on them. He is a new subscriber and has not been through the agony and torment of my frequent disclaimers on the subject of how I am just a lowly participant who would not issue all out buys, sells or anything else for others. :-(

What I would do however, is tell you what I am doing and last week to my recent buys in IEF (7-10yr) and IEI (3-7yr) I added SHY (1-3yr). The old saying goes “real men trade the long bond” and I guess I am not a real man because I don’t want to touch that far end (20+ years) of the curve at this time.

The reason I bought SHY is as it has been in the past, not to gain in its price but to use it as a dividend paying cash equivalent now spitting out significantly higher interest than it was just 6 months ago. Today, amid rising inflation concerns and everyone’s certain knowledge of a new bond bear market, it felt like the right time to increase bond exposure. The 2yr is paying higher income and it turns over much more quickly than the 20+ year (TLT).

Here is the 2yr note and its fairly favorable Commercial Hedgers position (public opinion is similarly constructive). This and similar graphics courtesy of Sentimentrader.

So if you buy 1-3yr Treasury bonds you are buying something at a much cheaper price than a year or two ago and being rewarded with greater income each month. That’s all I can tell you other than for me, it was time to add this portfolio balancer against the mass perception out there that bonds are done for.

Again, they may well enter a bear market. There is certainly reason to believe that global debt is out of control, never to be reeled back in but rather, inflated away. But the 2yr is a borderline cash alternative and even on the longer dated Treasury bonds, a contrary setup is taking shape as we have been noting with Amigo #2 and his targets at the limiters.

The 10yr is at the 2.9% target.

The 30yr got to 3.2%, a hair below the 3.3% target.

The thing here is that it was we who were watching for a rise in these yields and by extension, the inflation trade long before the masses got on the play. Now with the masses on board I take the other side of the trade at least for some portfolio balancing and income. Were I a perma bull on bonds you might suspect some book talking going on. But no, it’s just good old fashioned contrarian stuff with some income and portfolio balancing aspects to boot.

Here are the Commercial Hedger views on both the 10yr and 30yr. They are contrary bullish and ‘getting there’, respectively with both showing net Commercial longs.

The weekly view of the 10yr yield is obviously bullish and that is why the herd is bullish. I don’t want to make fun of that because there have been times before when our bond market analysis, which would ultimately prove right, had to endure long periods before the favored view came in. So for now why don’t we just tout that the yield has reached target and be open to an eventual reversal. The thing about bonds though, is that you can position for portfolio balance and collect income while waiting to see if you’re right.

Interestingly, the 30yr weekly view has not yet broken out. Will it? The target is a bit higher, but it would be neat for it to halt at this point.

Global yields have already started to ease a bit, after all.

The Fed’s calculated 5yr and 10yr Breakeven Inflation Rates remain in the up trends that began in early 2016 when gold turned up first, led the miners and silver and then commodities and stocks. The gold sector has long since become an also-ran in the inflation sweepstakes, but the cyclical stuff has continued apace.

With respect to the message noted on page 17 yes [in the Global Market Internals segment, correlating inflationary price effects with world exports], I’d say that any waning of the current inflationary backdrop would not be good for global asset markets on balance.

Let’s leave with a picture of the daily yield curve (macro Amigo #3), still down trending and favoring an ‘all’s well!’ view for the macro at this time.

Subscribe to NFTRH Premium for your 40-55 page weekly report, interim updates and NFTRH+ chart and trade ideas or the free eLetter for an introduction to our work. Or simply keep up to date with plenty of public content at and Also, you can follow via Twitter ;@BiiwiiNFTRH, StockTwits, RSS or sign up to receive posts directly by email (right sidebar).

By Gary Tanashian

© 2018 Copyright  Gary Tanashian - 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.

Gary Tanashian Archive

© 2005-2018 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules