Thursday, September 15, 2005

Bonds and Notes

Here are updated hourly charts of pit trading in the December t-bond futures and in the 10 year note futures.

I am bullish on both these markets and expect the t-bond futures to rally into the 121-123 range and the 10 year notes to make it close to 116 over the next couple of months.

Right now the yield curve is steepening as you can see from the fact that the notes have so far held their lows while the bonds have made new reaction lows. A steepening yield curve means that traders are once again thinking that the Fed is going to pause in its campaign for higher interest rates.

In any case I now think the bonds will drop to the bottom of their current box near 115-04 and that the notes will drop to the 1/2 point of their box near 110-30. After that both markets will resume the move up to the targets I cited above.

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