Since late July, 30-year Treasury bond futures have rocketed from 114 to near 120. Jack Broz, president of the Marlin Letter, explains firms bought new paper at a yield of 4.7% and pushed rates up through auctions, then a couple of overseas hedge funds blew up, and $30 billion was liquidated into U.S. bonds, triggering massive buying. In the background, the U.S. government bailed out Fannie Mae and Freddie Mac and the stock market has taken a beating.
“It’s just been up, up and away,” he says. “With the Dow getting hammered like this, you have to think about the market going up rather than coming back lower,” he says, and 30-year T-bond futures should trade between 121-03 and 123-02.
“The two, fives and 10s all have a bearish pattern developing and the 30-year does not,” says Holly S. Liss, VP global futures for Citigroup Global Markets Inc. She expects a near-term correction down to 116-16, then a surge past 120. “You definitely have flight to quality issues and that’s not going away tomorrow.”
Harold Lavender, independent broker and trader, says 30-year T-bond futures will range trade between 119 and 120-16 for the next six to eight weeks. “Long-term mortgages have gone from 6.55% to 5.88% in the last two days. They need money, so they are making it more attractive,” he says. “There isn’t much appetite for rates to go much higher,” at least until post election, he says.
