With a bump up in inflation expectations over the last month, Treasury bonds have dropped, which is logical. If my analysis is to prove correct and the 30yr Treasury yield is to hit 3.3% in the coming months, Treasury bonds should have one more strong rally in them before topping. If the analysis is wrong, then bonds will have already started the next decline (yields the next rise).
Looking at the chart of 20+ year Treasury bond fund TLT (chart factors dividend income) we see a drop to a logical and clear support area, that includes the 200 day moving average as it becomes oversold. Frankly, I was ready to buy this for a trade before deciding “hey man, cool your jets and let it settle”.
If TLT breaks below support our current view of an ongoing but interim disinflationary phase will come under a lot of pressure, as the indicator could start to look more like the next inflationary phase is coming sooner rather than later. For now, it’s an undecided macro indication as the disinflation and pro-bond view attemps to hold the support area.
