Bonds in a Box

Bonds in a Box

March 15, 2017 Off By Chuck

The market has already baked in an almost certainty for a quarter point rate hike as the outcome from tomorrow’s FED meeting. The 30 year bond yield has risen almost 50% from last July’s bottom and currently sits in its consolidation “penalty” box as is seen in the chart below. Additionally, yields remain are testing the highs last seen in October 2014.

The market has a tendency to do exactly opposite of what everyone expects. With the dumb money currently long yield and the smart money short, I find this setup up very fascinating and am interested to see how it all plays out. If the FED response is to push rates higher and the market follows, I would expect we see much higher yields (lower bond prices) in the future as the bull flag pattern that has developed points to a 30 year yield north of 4%. While that will be good for bank stocks, bond holders, especially those holding long-dated maturities and those buying or refinancing property will be likely be in for some pain.