Is Mr. Market about to deliver the coup de grace to bond bulls? It certainly appears that way. They’ve been getting schmeissed regularly since a frightening few days back in March 2020. At the time, investors were struggling to decide how covid would affect their financial lives. The wild gyrations near the top, followed by the subsequent collapse of Treasurys as yield soared, attests to the fact that they all got it wrong — and so did everyone else who subsequently jumped in.
In technical terms, TLT, an ETF proxy for T-Bonds maturing in 20+ years, is on thin ice. It tested a key support two weeks ago when it came down to the red line, a ‘midpoint Hidden Pivot support’ that must hold if TLT is to avoid a further fall to the 80.84 target. Although the line has yet to be penetrated decisively, it looks to be giving way. A two-day close beneath it would likely send TLT down to at least 88.05, a last-ditch support. Beneath it lies an abyss that portends a rise in long-term rates to at least 5.5% (as noted here earlier) from a current 4.27%. If there is a bright side to this scenario, it lies in the implication that an all-but-certain debt deflation much more destructive than any consumer inflation we are likely to experience is going to be yet a while longer in coming.