Bonds on the wane?
- Very low bond yields are worrying for many
- Bond prices are heading lower
- Let's have a look at a few charts to speculate about future developments
It has long been a mantra in bond traders circles "I must never sell bunds" (Think Bart Simpson doing his lines on the blackboard).
Only last week Bund Futures made a new all time high (referencing the adjusted continuation charts). Since then we've posted some red; posting what the Japanese call a "Three Black Crows" formation: Three back (red using the colour scheme mostly favoured these days) candles in a row. This is bearish... in fact yesterday was number four, and although we're seeing some green today we're already seeing evidence of sellers re-emerging on these gains.
So whisper it (you don't want people giving you funny looks!) but bond prices are heading lower, at least for now.
Obviously the "fundamentals" behind this are central banks making some tentative noises about tapering QE.
For now I'm treating this as healthy retracement, but some markets (10 Year Notes in the US immedaitely springs to mind) are getting close to some important support levels, and if/when these start to break things could take on fresh momentum.
We shall keep an eye on this situation. For now here's a market-by-market guide to the key levels we need to be watching out for.
Bund Futures (Dec 16):
164.14 was yesterday's low.
163.06 is a short term Fibonacci support.
162.56 is the mid September low/bounce.
161.87 is the bottom of the "Brexit day" gap
Long Gilt Futures (Dec '16)
127.87-92 is the next support of note below here being the Neckline of a potential "Head and Shoulders" topping formation and the recent low from mid September
127.19 is a Fibonacci support below that.
T-Notes (US 10 Years, again Dec '16, quoted in 32nds):
130.03 was yesterday's low
129.23-26 is a Fibonacci support level where we've already seen one bounce in mid September.
127.18 is the next support of note below here...
— Edited by Clemens Bomsdorf
Clive Lambert is chief technical analyst at FuturesTechs