Article / 16 January 2018 at 14:46 GMT

Bond futures outlook – the bears are winning

Technical Analyst / FuturesTechs
United Kingdom
  • We've seen weakness in bonds over the past month
  • This move has been led by the US, the QT first-movers
  • US topped out back in June 2016

By Clive Lambert

Things continue to look interesting in bonds with weakness over the last month or so putting some distance from the highs from last year.

This move has been led by the US for obvious reasons as they've started raising rates and tapering QE before anyone else.

Chart 1: T-Notes Weekly
T-Notes Weekly

This chart shows how bonds in the US topped out back in June 2016 in fact. We then saw a sharp selloff, a recovery, and now fresh selling since the high back in September. We are close to retesting the Dec '16 low, which is 121.04 on this adjusted continuation chart.

If you take this down to a daily timeframe there have been several breaks lower in the last few months interspersed with periods of consolidation. We broke lower through support at 123.125 last week and now we are watching to see if any recovery fails at or shy of this level, having posted a couple of "Hammer" candles in recent sessons to suggest the ship has steadied for now.

The Bund future has also seen weakness in recent weeks although at present is trying to recover. We are watching  160.94,161.24 and 162.51-55 on any recovery (160.94 is being tested as I write!). To the downside 160.11 and 159.93 are the key supports before we get to Fibonacci support at 159.68. Below here the bears can target 157.14. Below is the daily chart.

Chart 2: Bund Futures Daily
Bund Daily
Another thing to note about the Bund chart is how the recent selling has seen us trade through the 200-day SMA, the green line on the chart. If you take a look at the daily chart for the Gilt future, the benchmark for UK Bonds, you can see another market trying to put some distance on this key mark, although in this case we've not seen any sort of "neat" price behaviour about the average.

Instead Gilts have been taking more notice of trendlines, and there's a trendline on the Weekly chart, currently sitting just below at 123.39, that's keeping them occupied right now. We're holding above here; giving the bulls some hope.If this breaks the next downside target is 122.21, then 120.59, then 117.98.

Chart 3: Gilt Weekly.
Gilt Futures Weekly

– Edited by Clare MacCarthy


Clive Lambert is chief technical analyst at FuturesTechs

Clive Lambert - FuturesTechs Clive Lambert - FuturesTechs
We may have found some support for now. Gilts and T-Notes are both sitting on top of key supports. Here is my Gilt report to clients from this morning.
Alan M Alan M
Fantastic call Clive, really well done, what a start to the year! Sickened i didnt manage to hold this trade


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