16 Dec 2014
Don’t chase treasuries higher from here – RBS
FXStreet (Barcelona) - William O’Donnell of RBS, suggests that chasing treasuries higher from the current levels should be avoided for now, and the market should instead look for selling signs.
Key Quotes
“Wanting shorts should stay patient for signs that this overcooked (statistically) Treasury rally has run its course. I have no clues as to when that will happen but the indicators cited above tell me that it could be soon, at least for a short term tactical correction.”
“For the longer term, my telltale will be the monthly yield chart for 30yr bonds which did so well (using the slow stochastics momentum oscillator) in guiding bearishly through the whole 1.5yr sell-off after mid-2012 and through the rally in 2014.”
“Check out the signals that monthly momentum has generated from overbought/oversold conditions and one has to be impressed... In today's chart you can also see that monthly momentum still aims bullishly, making a return to the all-time rate lows for 30yrs a legitimate threat.”
“Momentum is getting overbought but we appear to be at least a month or two away from a bearish turn, at the earliest.”
“Don't chase Treasuries higher from here (keep in mind how over-skis bullish bond market sentiment has become) and wait for signs that the coast may be clear to sell. So the sidelines are where we sit, slack-jawed but unwilling to chase.”
Key Quotes
“Wanting shorts should stay patient for signs that this overcooked (statistically) Treasury rally has run its course. I have no clues as to when that will happen but the indicators cited above tell me that it could be soon, at least for a short term tactical correction.”
“For the longer term, my telltale will be the monthly yield chart for 30yr bonds which did so well (using the slow stochastics momentum oscillator) in guiding bearishly through the whole 1.5yr sell-off after mid-2012 and through the rally in 2014.”
“Check out the signals that monthly momentum has generated from overbought/oversold conditions and one has to be impressed... In today's chart you can also see that monthly momentum still aims bullishly, making a return to the all-time rate lows for 30yrs a legitimate threat.”
“Momentum is getting overbought but we appear to be at least a month or two away from a bearish turn, at the earliest.”
“Don't chase Treasuries higher from here (keep in mind how over-skis bullish bond market sentiment has become) and wait for signs that the coast may be clear to sell. So the sidelines are where we sit, slack-jawed but unwilling to chase.”