IndiaCharts

Bond markets Crashing - US 10 year new low

The Media often quotes that the dollar will rise because interest rates are rising. But bond markets lead interest rate advances and there is no correlation historically between the dollar and bond prices. There are brief periods that this relationship shows relevance but mostly it does not. I spent a while looking at the chart of both together and could not spot anything of relevance. So it is a useless thesis. The biggest dollar rally recently in 2015 did not involve rising rates or falling bond markets. The last taper tantrum in 2013 caused Indian bond markets and currency markets to shiver but had no impact on the dollar index that was in a trading range.

With those comments let me come to the bond market. The US 10 year bond prices broken below the swing lows of 2016-17, and the low of wave A, putting bonds at the lowest level since 2014. The 30 year bonds were also down but are 3 points away from breaking the 2017 low. On the 10 year it confirms that wave 3 of C down is in progress and that has a long way to go. As seen in wave A as well the third wave is where prices really fell off a cliff, we are now rolling over and speed will pick up as yields rise. During the early stages of wave C traders added to their long positions and last week EWI reported CFTC long positions at a record. In number of contracts the long position exceeded the 2016 top. Bond traders are buying this dip and getting stuck. As they unwind the fall will lead to a capitulation of bulls into wave C. This should become a interest rate shock for the world markets especially where debts are high. It will drive the trends in currency markets as well. I may also add that the 1987 crash that is often talked about was something similar at a smaller degree where a third wave down in bond markets shocked equities eventually.

bonds 100118

You are here: Home Inter Market Analysis Bond markets Crashing - US 10 year new low