Bearish on Bond but keeping cautious

Bearish on Bond but keeping cautious

          Recent plunge in commodity price cause a concern over global deflation. US 10 year Treasury yield hit the lowest since 2013. However, I think global deflation is unlikely to worsen at this point. In addition, I explain Crude Oil market had hit a mid-term bottom(here) and deflation caused by commodity price plunge will come to an end.Market reaction to deflation is overdone and turning point had reached so I will open a position to short US 10 and 30 year Treasury.

          

           Figure 1: US loan growth accelerate at a faster pace by annually 8%. This growth rate is unlikely to take place at a deflationary environment.

Source: SoberLook.com

           Figure 2: As well as US, Europe credit condition still is healthy. Demand and supply of credit is at an expansionary phase.

Source: Danske Bank

           Figure 3: Google data engine reveals investor is overreact to deflation.

Source: Google

           Figure 4: 1 year rate of return of 30 year Treasury hit a turning point seemingly.

Source: Thechartstore.com

           Figure 5: Public opinion towards Bond is extremely optimistic and price pattern show a reversal possibly.

Source: KimbleChartingSoultion.com

            All in all, 10 and 30 year Treasury had reached a turning point that a reversal is immediate. However, as I say in topic, staying alert to this analysis is necessary because most of economist (see this link) predict 10 year Treasury yield will be higher at first half of 2015. As usual, forecast is wrong when consensus is made among the crowd so I only just open this position with few risk exposure and tight stop loss is placed to control the risk.