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MLR - The beginnings of a bond bear market?

Some questions have come up from members as to whether ETFs such as TBT which is a 2-times inverse ETF of Barclays 20+ year U.S. treasury index, or TMV which is a 3-times inverse ETF of the NYSE current 30-year treasury index, are good investments as they are breaking their downtrend. To make it clear, when the price of bonds drop, their yields rise. Since TBT and TMV are inverse ETFs, when the price of bonds drop, the price of TBT and TMV rise.

On a fundamental basis, odds are that bonds will be entering a prolonged bear market at some point as interest rates are being kept as low as possible through means such as quantitative easing (QE) so have nowhere to go but up. That said, QE2 should continue until at least June and possibly longer in the form of QE3, so it is possible that rates could be kept artificially low for a prolonged period. Fed futures are pricing in a 25 basis point (0.25%) hike in rates by early 2012.

Attempting to guess the beginnings of a bear market, whether it be bonds or stocks, is most challenging, thus it is best to let price/volume show you the signs. Should we see a pocket pivot in TBT or TMV, we will alert members as this would suggest the potential of a change of trend or breakout to the upside.

 

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This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2018 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.
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