The iShares 20+ Year Treasury Bond ETF (TLT) declined from early August and the market ignored it – until this week.
This week, the 10-year treasury yield touched the incredible level of 1.60% as it rose by about 50 basis points this month. The stock market weakened and traders sold technological names left and right.
Let’s look at some maps.
In this weekly point and figure chart of the TLT, below, we used only price data and the chart shows a double breakdown pattern with a possible downward price target of $ 115.
In this long-term point and figure chart of returns on the ten-year U.S. Treasury bond, we can see an upward target of 2.38%, but a trade of 2.00% will be the bottom of a achieve long-term downward trend.
The trend in yields has been lower on this chart since 2000, but actually lower since 1981. Thank you Mr. Volcker.
A word about rates
Let’s talk about the background of rates.
House prices have risen in many parts of the US, and many market observers have linked rising asset prices and crude oil prices to the flood of stimulus money around the world.
Why would an interest rate hike be such an “overnight” shock to the market?
Bottom Line Strategy
A rise in the US dollar in the coming weeks could blunt the current commodity boom. The Fed could get nervous and do something to raise bond prices. Who knows?
Meanwhile, the TLT is in a deteriorating trend and I still see no declining price action. A bounce can occur at any time, but it may not be enough to reverse the current trend.
The ten-year treasury is likely to move sideways for a while at around 1.50%, but could reach 2% later this year or perhaps next year.
There are a lot of moving parts, so try not to get too caught up in the day-to-day jiggles.
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