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Bonds fall – more weakness coming?

The various US government note and bond contracts have all compressed lately and fallen through those compressions today. Here are the price charts:

Bonds, NOtes etc

There is some support around these levels from the older compressions also shown on these charts and this extends down several points from here (to 152 in the 30-Year bond). There is also support from older weekly-scale compressions as reported in the October 21st edition so it is dangerous to try selling short just because these most recent compressions have broken down. Our previous long recommendation 'timed-out' this morning and we are now sidelined.

We don't usually engage in the usual second-guessing of the market's reaction to the latest Fed meeting - we depend on a different kind of analysis but it is odd that lower US rates for longer should lead to this sell-off in bonds on both sides of the Atlantic. Accordingly, we are going to think about whether there are some feedback elements to all this and may decide to ignore the longer-term support in favour of short-selling on this new compression break. The whole world knows that bonds are mighty vulnerable and we wouldn't want to miss a big drop by being over-cautious.

More soon.