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Bond Breakout

Published 01/04/2019, 12:31 PM
TLT
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US Treasury bonds have been the subject of some debate since the Fed announced the end of its bond-buying programs. Rates had to go up, said the Fed. But they have not. Then the Fed started to run off its balance sheet, which was followed by another round of calls for higher rates. And again, nothing.

When the Fed embarked on a tightening program, surely rates would have to go up, right? It has raised rates 8 times, now, and long-term bond rates still have not gone up materially. In fact, what is happening right now is that bond prices are near 52-week highs and rising.

iShares 20+ Year Treasury Bond ETF

The chart above shows the price action in the US treasury Bond ETF TLT over the last 2 years. Following a low in the beginning of November, prices have been rising (rates falling). On Thursday, the price broke above what had been long-term resistance. It may be a stretch to say that bond prices have moved out of consolidation and back into a long-term uptrend. But they certainly are not trending lower.

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