- New Science in old markets -

Bonds make many tops – time to try the widowmaker

US 30-year bonds, 10-year notes, German Bunds and UK Gilts have all made daily-scale top extensions in the last few days. This coincides with the newsworthy event that rising prices have also just pushed the benchmark 10-year Bund high enough for the yield to drop to zero. This doesn't affect our analysis but it does illustrate the madness that has gripped bond buyers in recent times. Zero? Seriously?

These are now all candidates for a short-sale, if only as a tactical  trade. If prices drop sharply then think about holding on to a short position for more than the few weeks that such a daily-scale signal warrants-we will advise. By implication, because these signals are so widespread, all bonds that move with government bonds (i.e. most of them, but not junk) can also be sold with the same horizon. The US:

30 & 10 yr top exts

The Europeans:

Bund, Gilt top ext

The 'widow-maker' was the name given to the Lockheed P104 Starfighter, a 1950s single-engined supersonic interceptor that was prone to crashing. The name has been appropriated by the military wannabees that populate financial markets to describe trying to short-sell bonds, because of the high casualty rate. Several high-profile careers have been curtailed by this trades, as were others in the Japanese Bond run-up from March 2000 when the BoJ was the first to use Quantitative easing in the 21st Century.