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
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.
