Update on Bond

Update on Bond

                 Recent bond selloff makes a surprise on more investors. However, I expected and warned that in my previous post (here). In coming second half of year, we will entre cyclical reflationary phase in economy. It is time for last year global easing to take effect on demand and inflation. Bond and Commodity will underperform and outperform among asset class respectively. Bond start to approach oversold level so conservative investor can take some profit and trend follower can use some tools to prepare profit taking and find the opportunity to get into market after correction. It really depends on your trading and investment style.

         

Figure 1: Red line on iShares 20+ Year Treasury Bond ETF chart shows I am bearish on bond in my post on February.

Source: Barchart.com

                Figure 2: When bond yield rise with momentum, commodity and crude oil have an impressive gain. Economy is likely to entre reflation.

Source: Nautilus Research

   

                     Figure 3: US House price leads Core inflation and keep on the rising trend.

Source: Scottgrainns

                 Figure 4: Drop in Chinese yield will boost housing market and demand for commodity in second half of year.

Source: Nordea Market and Macrobond

                Figure 5: Although US data in first half of year is weak, the possibility of recession is still low so economy is not at risk at deflation triggered by recession.

Source: PFS group

                  Figure 6: COT data reveals Net Commercial position on 30 year Bond is close to previous high when bond is approaching an oversold level.

Source: Gavekal Capital

           

                    My takeaway is bond is approaching oversold and I prepare to take some profit in short term but bond yield still keep rising in inter meditate term. As a trend follower, I no longer predict what level bond yield will reach in future and see my technical tools to help me to take the profit.