Have US Bonds Bottomed?
Interest-Rates / US Bonds Jun 27, 2022 - 10:18 PM GMTBy: Nadeem_Walayat
A patron asked if US bonds have bottomed / are cheap to buy now that inflation is 'peaking'.
What I see is a severe bear market that had taken US bonds to a very oversold state (MACD) with the recent rally being very feeble and purely acting to unwind from that very oversold state. So I doubt very much that US bonds have bottomed. Though the rate of decent should moderate and become more choppy as the market works it's way through a series of CPI monthly prints so a more gradual trend lower towards the natural support level of $100 is likely. The fact that bonds are rolling over and likely to trend lower once more is another confirming reason for lower stock prices ahead, i.e. falling bond prices equates to rising interest rates, though the relationship between bond prices and stock prices is more complex than that as bonds are usually supposed to be a safe haven for investors during a stocks bear market. Instead bond investors have got hit far worse than stock investors which isn't surprising given out of control inflation. The only reason bonds held up for as long as they did was because of the Fed BUYING US bonds to monetize government debt which apparently the Fed has now stopped doing for the time being hence falling bond prices.
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By Nadeem Walayat
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Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.
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