There is no denying that the Mario Draghi comments have caused a massive rally in today's stock markets. The important and highly followed SPDR Dow Jones Industrial Average (NYSEARCA: DIA) is trading higher by nearly 2% on the session. Many European stock indexes such as the iShares MSCI Italy Index (ETF) (NYSEARCA: EWI) and the iShares MSCI Spain Index (ETF) (NYSEARCA: EWP) were up by more than 6% this morning.
Normally, a rally of this size would cause the bond market to sell off, however that's not exactly the case. Today, the important iShares Barclays 20+ Year Treasury Bond (ETF) (NYSEARCA:TLT) is trading lower by just 0.58 cents to $131.56 a share. Usually, money will come out of bonds and travel right into the riskier stock market. When bond prices go higher it's generally a sign that the institutional money is seeking safety and security. So far, though, today has not seen that type of action. Short term day traders can watch for intra-day support on the TLT around $131 and $130 levels.
Should the TLT decline further, today, it will be telling us that some institutional money is fleeing the bond market and possibly going into stocks. So far, however, today's bond action is not saying that.
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Is Bond Market Calling Draghi's Bluff?
Published 07/26/2012, 01:16 PM
Updated 07/09/2023, 06:31 AM
Is Bond Market Calling Draghi's Bluff?
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