Wednesday, August 31, 2005

Bonds and Notes

As you can see from the updated hourly charts above, the September bond and 10 year note futures have rallied relentlessly ever since their lows on August 9. It is quite unusual for any market to move upward for three weeks without a significant break of a previous day's low. But this is what we have seen in the bonds and notes. It is an eye-popping show of strength and is one more piece of evidence that the bonds are headed for the 121-123 zone and the notes for 116

I notice that the short end of the market is strong too so I am beginning to think that bond traders are anticipating a pause in the Fed's string of interest rate increases, perhaps in response to the economic damage caused by Katrina.

The bonds are now likely to react a box or so from the 1/2 point of the current box at 118-20 and the notes will also react a box or so from the top of the current box at 113-04.

1 comment:

Anonymous said...

how can you be so bullish on the equity markets and so bullish on bonds at the same time? I believe we'll see 10's @ 3.75% and 2's @ 3.50% by nov, but I don't see how there is any significant upside to the equity markets in 06