Steve Saville makes some bond market comments that I agree with. It's tricky now on a trading basis though. For instance the commercials are long 307,443 Eurodollar futures (and options) and 191,484 10yr USN as of Tuesday 4/12. Those markets have rallied some since Tuesday, but still this doesn't quite feel like the moment to being getting aggressive short on a short term basis. I may look to cover some of my successful ED shorts if we dip a little lower this week, proably should have done it Tuesday or Wednesday. I'm wondering about May's payroll report, and will have some DTS commentary
fms.treas.gov
after I get Monday's report covering the 15th withholding cut off. Actually, when you think about all this, it's completely consistent with the "dig yourself into a deeper hole" F3IP (Fully Funded Fed Inflation Program) activities of the MoP (Ministry of Propaganda).
Saville: The consensus view is that interest rates will rise over the next 12 months, but the consensus view is often wrong. In this case we think the majority is wrong, but not because it is incorrectly anticipating higher interest rates. Rather, we think the majority is wrong because it is not anticipating high-enough interest rates. In other words, interest rates are likely to move much higher over the coming 12 months than most people currently expect.
In the short-term, though, we would not be surprised to see a rebound in bond prices (a drop in long-term interest rates) because price action suggests that a bond-price low was put in place last Wednesday and because the 'sentiment pendulum' has swung too far in one direction. For example, the latest Commitments of Traders (COT) report showed that small traders in T-Note futures were short 4.5 contracts for every contract they were long. Also, the Rydex Bond Ratio indicates that there is currently $40 (down from a high of $60 earlier last week) in the Rydex Juno Fund (bearish on bonds) for every $1 in the Rydex Government Bond Fund (bullish on bonds). The Rydex Bond Ratio hasn't been a very reliable indicator over the past couple of years, but last week's readings do reflect lopsidedly bearish short-term sentiment. |
