Bonds 04 (Jul 15 - Aug 17)

[winston]

Bonds (10 year): 1.44% versus 1.475%.

Gapped to a new all-time high Friday as bond yields around the world continue to fall.

Source: Investment House

[winston]

This 'Safe Haven' Trade Is Getting Dangerous

By Jeff Clark

U.S. Treasury bonds are considered a "safe haven" trade.

Investors flock to Treasury bonds, or "T-bonds," in times of trouble or uncertainty.

And over the past few months, T-bonds have performed well. Investors are nervous about the European Union possibly breaking apart... a potential global recession... and the upcoming elections in the United States.

We don't often see T-bonds rally like they have over the past two months. The 30-year T-bond has gained about 10% since May.

That's a terrific return for a stock. But for a bond, it is insane...

You see, T-bonds are considered the most stable, secure, and safe investments on the planet. A double-digit move in two months is far outside the norm.

And it now looks like we're reaching a short-term danger point. Take a look at this 60-minute chart of the iShares 20+ Year Treasury Bond Fund (TLT) – an exchange-traded fund that tracks the price of long-term T-bonds...

Please Enable Images to See this

This chart is forming a bearish rising-wedge pattern with negative divergence on the moving average convergence divergence (MACD) momentum indicator. This type of pattern usually breaks to the downside.

In this case, a breakdown could lead to a move for TLT all the way back to about $132 per share. That would essentially take back all of the gains in the Treasury bond market since the "Brexit" vote late last month.

There's room inside the wedge for TLT to push higher just one more time. It's trading at around $142.50 today. Maybe it can run to as high as $144 per share. But there's a lot more risk than reward to owning TLT here – at least for the short term.

This is a dangerous setup.

After an 11% rally in just two months, the Treasury bond market is looking a little frothy. Investors buying T-bonds as a safe haven for their money today could regret it in a few weeks.

Source: Growth Stock Wire

[winston]

The Smart Money is Very Bearish Now

By Harry S. Dent Jr.

The great commodity bubble has been steadily bursting since mid-2008, but has taken a nosedive since early 2011. It’s now down 70% overall, and 80%-plus in industrial commodities like iron ore.

Real estate has seen its first bubble burst and it clearly looks like a second one is on the way.

Stocks have now seen a third bubble and the largest burst is still just ahead… but, the question remains: when does it begin in this endless realm of QE and stimulus?

The bond and gold markets may give us some clues here. Look at the 10-year Treasury bond yield below:

See larger image

The last major spike in yields peaked at 5.3% in mid-2007, just ahead of the great financial crisis.

That crisis brought yields down to 2% in late 2008 – both from recession fears and U.S. bonds becoming the safe-haven play along with the U.S. dollar – not gold!

But QE brought yields back up to just over 4% by early 2010 and they’ve been falling ever since. Gold is following right along with it, with inflation unexpectedly sinking, rather than rising, after unprecedented QE.

By mid-2012, the first fall in yields was down to 1.37%. We’re now at levels even lower than that, with interest on the 10-year Treasury reaching 1.34% Wednesday morning.

This should be a strong endorsement, especially with Lance Gaitan’s Treasury Profits Accelerator predicting a snap-back, near-term move down in bonds (up in yields).

I think a major, or at least substantial, reversal in yields going back up could come soon – just as everyone now expects yields to keep going down towards zero.

And that’s the problem.

The “dumb money,” or large specs (mostly failing hedge fund managers that have become the trend followers instead of the trend leaders), are at near-record bullish levels long on futures while the commercials (insiders), or smart money, are at record short levels.

They’re the ones that are right at major turning points like this. If the shorts are right, then yields will go up substantially… likely for many months.

Last November, in Boom & Bust’s “The Fixed Income Trade of the Decade,” I was forecasting that 10-year Treasury yields could spike back up to 3%, or higher, making that the time to buy, as deflation will likely bring them back down towards zero for years afterward.

You get higher yields and higher appreciation in the same investment that doubled in value in the 1930s while everything else was collapsing.

Let’s hope that bond yields do go back up, as the smart money extreme short positions suggests. This could be a long-term bottom in yields but, more likely, the last low near-term before the ultimate lows hit years from now.

The large specs in gold futures are also at record bullish levels, while the commercials are at record short levels. That suggests we are also close to the peak of the bear market rally we have been predicting, with gold towards $1,400.

We hit $1,373 gold on Wednesday, and it is likely to make it to $1,400. If we don’t make it to $1,400 by July 15, I will advise selling anyway. So, it’s time to start selling gold and silver if you didn’t already do so in April 2011 when we recommended it.

Here are the important insights:

If gold goes down it suggests slowing – not rising – inflation, as gold correlates more with inflation than anything else. Either that and/or we don’t see another massive round of higher QE and stimulus, as is currently expected.

If Treasury bond yields rise, it would suggest higher inflation… or more likely in this case if gold is falling, there’s an increased risk even for sovereign bonds.

How could that happen, you ask?

Once investors start to realize that Italy is the next Greece, and that it’s too big to fail (or bail out), yields in Southern Europe may start spiking.

Germany and Northern Europe could then follow, as they will have to bail Italy out (or not), and that move could prompt investors to question all bonds, even U.S. Treasurys.

Or, put more simply, the long leveraged futures trade in sovereign bonds may finally reverse due to overconfidence and investment!

To summarize: if we see gold down and bond yields up, this will likely be bad for stocks and would suggest the first large crash in stock hits sometime between mid-July and December of this year.

A clear break below the line in the sand at 1,800 on the S&P would confirm this. In the July issue of The Leading Edge, I will look at all major markets around the world and show why there has already been a clear top in 2015, and why a crash looks increasingly imminent, whether U.S. large-cap stocks eke out a slight new high or not… and I think not.

If we do get a spike back to around 3% or a bit higher in 10-year Treasury yields in the next several months, it would bring about The Fixed Income Trade of the Decade in long-term Treasurys, and AAA corporate bonds, that did the best of any other sector in the Great Depression decade of the 1930s…

We will evaluate that if it happens, in case the global debt implosions get so extreme, so fast, that we end up seeing a longer-term bottom in Treasury yields here just below 1.4%.

But more importantly, the present configuration suggests a major crash in stocks very soon rather than later.

That’s why it’s time to get more conservative in stocks and hold out for the long Treasury and AAA bonds trade likely still ahead.

Source: Economy & Markets

[winston]

Here’s What the Bond Market Is Trying to Tell Investors

The bond market is sending a clear signal to investors, according to one analyst.

by Scott Gamm

'We've got risk aversion and a sign that maybe markets are starting to price in a recession'

'Whenever we see the yield curve flatten like we are seeing right now, that usually signals a market that's anticipating a recession and further monetary stimulus from the central banks.'

Erlam said there's a 'good' chance of a recession in the next year, particularly in the UK, citing a growing number of global risks, including Brexit.

Source: The Street

https://www.thestreet.com/video/1363013 ... yptr=yahoo

[winston]

Bonds (10 year): 1.36% versus 1.39%.

After the jobs report, the 10 year yield rose to 1.43%. By the close, however, even with large index gains, bonds rallied back and dropped the yield.

Despite 'better' data that should reduce the risk in the economy and the improve the odds of a Fed rate hike, bonds are rallying.

Source: Investment House

[winston]

It's Too Risky,' Says the Bond King

By Dr. Steve Sjuggerud

Last week, Bill Gross – the Bond King – told Bloomberg Television "it's too risky" in government bonds right now.

In short, interest rates have gone down too far, too fast.

While the "smart" money (like Bill Gross) is avoiding buying bonds today, the "dumb" money (like mutual-fund buyers) piled into them last week in the wake of the "Brexit."

(Specifically, bond funds had inflows of $14.4 billion last week, according to EPFR Global.)

Where do you side? With the smart money, or the dumb money?

With so many fears around the world, investors have fled to supposedly safe government bonds… which pushes interest rates lower.

You might not have noticed… But all of a sudden, long-term interest rates have crashed to the downside.

Take a look at this one-year chart of the interest rate on the 30-year U.S. Treasury bond…

Long-term interest rates have fallen from 3.2% to 2.1% in the last year. That's a 34% decline!

And this isn't some obscure number I'm talking about here… This is the U.S. government bond.

This massive fall in interest rates is thanks to investor fear… Investors are now buying government bonds for safety.

We've hit an extreme in the short term. The dumb money is "all in."

The thing is, when the entire herd is putting its money into one investment, there's no money left to be made there.

(For example, when the herd bought property in 2008, there was nobody left to buy. That meant there was no demand… and prices fell. It's the same story in bonds today.)

The dumb money is about to get hurt, likely starting soon, in bonds.

For reference, during similar extremes in the past, interest rates have typically shot higher over the next 12 to 18 months.

You have to go back 18 years, to 1998, to find a moment when investors were as convinced as they are today about lower interest rates (based on bets in the futures markets in 30-year Treasury bonds).

In 1998, the interest rate on the 30-year Treasury bond bottomed at 4.7%. Then it rose more than 2 percentage points higher – to more than 6.7% – in 15 months.

It's not just government bonds…

The "dumb" money has also been piling into high-grade corporate bonds and junk bonds. Just last week, a record $2 billion flowed into LQD – the most popular corporate-bond exchange-traded fund. That's a weekly record – by more than a billion dollars.

I introduced the idea of betting on higher interest rates (and lower bond prices) to my True Wealth readers last month. We still haven't seen the start of the uptrend… So we haven't pulled the trigger just yet. But we look forward to it soon.

Instead of placing our bets today, we are going to wait for the uptrend in long-term interest rates… We are going to wait for confirmation of our idea here before we step in to take advantage of it.

I urge you to do the same – wait for rates to begin moving higher before you consider betting against bonds. But more important, I urge you to NOT buy bonds now – of any kind.

"It's too risky." Chances are good you'll lose money as bond prices fall in the coming months…

Source: Daily Wealth

[winston]

A Sovereign Bond Crash: How Would it Hit Stocks?

By Mark P. Cussen, CFP®, CMFC, AFC

Source: Investopedia

http://www.investopedia.com/articles/ma ... z4Ecu9ZvUA

[winston]

Bonds (10 year): 1.58% versus 1.53%.

Broke below the 20 day EMA for the first time on this pullback, now reaching the upper gap point from late June.

After hours on the Turkey coup attempt bonds rallied off the Friday selling but not a game changer at this point.

Just for reference, the prior Friday bonds closed at 1.36%.

Source: Investment House

[winston]

How pros are advising clients in this bizarre world of negative rates

by Rayhanul Ibrahim

These negative bond yields are spread out across all the EU countries, particularly the stronger ones, such as Switzerland, Germany and France, with nearly 40% of developed market bonds going negative across the world.

However, even the weaker European economies, such as Spain, Italy and Ireland have some bonds with negative yields.

As a result, UBS analyst Bhanu Bajewa suggests that emerging market bonds may be the best bet for investors. These come with positive yields, but a greater risk of default.

UBS considers Brazil, Mexico, Poland, and Malaysia to be especially attractive.

Source: Yahoo Finance

http://finance.yahoo.com/news/negative- ... 00842.html

[winston]

The entire financial system is exposed to this junk bond market

By Tim Price

Source: Sovereign Man

http://www.thetradingreport.com/2016/07 ... nd-market/