30 Year Treasury Bonds

The 30 year US Treasury bond has had a rough couple of months. The yield on the 30 year US Treasury bond was 3.45% on August 25th and has since risen to a yield of 4.73%, which means that the price has fallen over 18% in roughly 6 months as price and yield move inversely to each other. It is not very surprising as general commodity prices have skyrocketed while trust in paper assets has declined, which in turn has stoked inflation fears around the globe. This has led to frequent discussions between Pinnacle analysts regarding topics including hedging techniques and the overall technical state of the Treasury market.

The chart below shows the Generic 30 Year US Treasury Yield back to 1985. This bond bull market has been quite impressive although the chart below shows that the bull may be ending. The white line represents the downtrend line in yields from 1996 to 2011. During bond sell-offs, the yield found support at this line 4 times before this latest sell-off pushed the yield above the downtrend line. But is this enough evidence to call the bond bull over?

Viewing the last 999 days gives a slightly different picture. The yield has found support at exactly this level four or five times over the last few years. The green lines drawn on the chart represent the support zone. If we do see yields break higher out of the support zone this could add to the possibility that yields will move significantly higher. If the support zone holds we will likely see lower yields, and 4 out of 5 times that happened equities followed right with them.