Louise Yamada, one of the most widely followed technical analysts in the market, says the 29 year bull market in Treasury bonds is coming to a close. Looking at the 200 year history of interest rates in the US, such bull markets are historically 22-37 years in length, and this one is definitely looking long in the tooth. Although doubters insist that you’ll never get a collapse in bonds in a deflationary environment, Louise says that all bond peaks occur in such conditions.

Yields show prolonged, saucer like bottoms, much like we are seeing now. She also says that retail interest in such paper also surges when interest rates are at multi decade highs, as we saw clearly with last year’s flow of funds. When foreign buyers lose interest in our debt, the 30 year Treasury bond is the first place their lack of interest will show up.

The charts for the 30 year are setting up a perfect head and shoulders top, and when the yield break through 4.8%, watch out. The next stop may be 7%. Her advice is that if you are going to stay in the government bond market, shorted your duration as much as possible. My advice? Sell the 30 year bond futures, which today are selling at 119, up 2 ½ points from last week’s low. If Louise’s scenario plays out, it will take the futures well below 100. If you can only sleep at night with less leverage, buy the (TBF) and the (TBT) on the next big dip. We are about to enter the golden age for these short bond ETF’s.

 

Written by The Mad Hedge Fund Trader

Here are some details on the UltraShort 20+ Year Treasury ProShares ETF (TBT)  below:

The investment (TBT) seeks daily investment results, before fees and expenses, which correspond to twice the inverse of the daily performance of the Barclays Capital 20+ Year U.S. Treasury index. The fund normally invests at least 80% of assets to investments that, in combination, have economic characteristics that are inverse to those of the index. It also typically invests in taking positions in financial instruments, including derivatives that should have similar daily return characteristics as twice the inverse of the index. The fund is nondiversified.

TOP 10 HOLDINGS ( 4.75% OF TOTAL ASSETS)

Company Symbol % Assets 20 Year Treasury Swap N/A 1.63 20+ Treasury Swap N/A 2.56 20+ Treasury Swap N/A 0.4 Proshares Ultrashort L B N/A 0.16

 

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