U.S. Government Bonds took it on the chin again today, with the iShares Barclays 20 Year + Treasury Bond Index (TLT) losing more than 1.5%. You can see in the first chart below that TLT has been in a very steady downtrend since late August of this year. Obviously, bonds going down in price means interest rates going higher - they are an inverse relationship. It's worrisome to have rates rising in a slow economic environment, as this creates the fears of "stagflation" that we had in the 1970s. Also note on the Daily TLT Chart below how any rally attempts during this downtrend have been curtailed right around mid-levels on Percent R.
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TLT Daily Chart
Stepping back to a big picture Weekly Chart, you can see below that TLT is fast approaching the 90 area. That area is right around where we found a bottom in bond prices over the past few years. A test of this 90 level on the downside looks very likely to me in the coming weeks. The question then is, do we hold/consolidate around there as we have in the past, or are we going to break down further? My view leans toward the former, that we should find a bottom around that 90 area.
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TLT Weekly Chart
Conclusion: U.S. longer-term bonds look to have some more short-term downside, but are approaching what should be a key support level. It will be very important to see if we can hold those key levels.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
