Bond Alert: Feb 6, 2015

This post updates our Jan 27, 2015 Update on Bonds:

This morning’s unemployment report has sent yields soaring.  The reasoning is that stronger employment will cause a stronger/earlier rise in interest rates than the Fed would otherwise have planned.

From a chart standpoint, the 10-year yield is very overbought.  In other words, we’d be aggressive buyers of notes here at 1.95% (128’150) with stops at 127’185.

Note that TNX has again tagged the underside of the rising red channel channel…

2015-02-06-TNX daily 1100…while prices (ZN) have tagged an important .618 Fib where it intersects with the .236 channel line.

2015-02-06-ZN daily 1100We think this bounce is very overdone, and are sticking with our Jan 27 forecast of a late February target of 1.53-1.58.  The ideal date: around Feb 20.

Because a channel bottom backtest is involved, the stops are pretty obvious.  A strong move north of this morning’s highs (19.53) would be cause for reassessment.

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