There were top extensions in ten-year note and thirty-year bond futures on Friday at a daily scale. This was mirrored by a bottom extension in the ten-year yield series which often provides ‘better’ signals as there is a long history without roll-over distortions.
There is also a large bond turn due today and so we advise short-selling either instrument here. Charts:
We have only just recommended short-selling US and European equity futures short and so this new ‘short bonds’ advice obviously means that we think both classes of asset can decline together. We have no view as to the fundamental driver behind such a mutual decline, but an obvious candidate is the imminent end to QE. This is hardly ‘news’ but markets often respond in their own time rather than when a new situation first arrives.
We shall see if this position develops well enough to warrant keeping it beyond the normal horizon of around 12 days—that will mostly depend on whether we also see some weekly-scale signals soon. We will advise.