To The Moon

For the past 3 years, bond market sentiment has been locked in a range, and that range has completely defined and framed the gyrations in bond yields (which not only created risk/opportunity for fixed income, but reverberated across markets via financial conditions shifts and valuation changes)

This period follows a previous sentiment regime which lasted about 2 years, which was equally important in framing some major moves in yields. We’re talking about inflation vs deflation macro-sentiment-risk regimes.

Or more simply, look at the chart and see where I’ve denoted deflation vs inflation — bond market sentiment traveled within a clear and defined range, and whenever sentiment moved to the edges of that range it either marked the exhaustion of an existing move or the imminent start of a new one.

That is, until the regime shifted. And this brings us to why this chart is important — if we remain in a macro-sentiment-risk regime of inflation then what we are currently seeing is a harbinger of a potentially significant push higher in bond yields, maybe even to new highs.

If we move on from that regime, then it’s full bull for bonds. Yes I know, I’m basically saying “it might go up, and it might go down“ — which seems like a useless and unhelpful message.

But the key for this exercise is to lay out the current very real tensions in the market, and trigger points...

Maybe my words here are low value, but I believe this chart is a key puzzle piece, and that’s what I’ll leave you with for this week.

Key point: The bond market is at the edge of two major macro-sentiment-risk regimes — the maintenance or breaking of the current regime will determine the next 100bps in bond yields. $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $iShares 7-10 Year Treasury Bond ETF(IEF)$ $iShares 20+ Year Treasury Bond ETF(TLT)$

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https://entrylevel.topdowncharts.com/p/chart-of-the-week-bond-yield-tactical