Bond Technical Strategy – Weekly by Lloyds TSB

The two-way pull for bonds continues. As equity markets slump through major technical levels that imply a prolonged bear market, the demand is dampened by the possibility that this increases the prospects for supply.

The two-way pull for bonds continues. As equity markets slump through major technical levels that imply a prolonged bear market, the demand is dampened by the possibility that this increases the prospects for supply. As we can see, the markets are volatile, but
broadly range bound (although spread plays continue to favour selling two year US notes against euros), as these two factors continue to influence investor sentiment.

Whilst I am a bond bear, it is prudent to accept the market will be underpinned in the coming sessions, but taking a long term view, the upside risks for yields remain. If gold was ever a barometer for future inflation then the current price is clearly a concern.It is far more logical that the current buying is being driven by safe haven demand,
but it will be interesting to look back at in coming years to see if this was a leading indicator. For the moment the upward trend continues with a break of all time highs likely in the coming weeks.

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