In November, the front month U.S. 30-year Treasury bond futures broke below 126-24. That level was not mere support, but the midway point between the all-time high made in December 2008 and the June 2009 low.
Retracements of 50% serve as strong support/resistance and pivot levels, particularly when they involve such volatile moves as we saw with the 30-year in 2008-09. The long bond has continued to fall and will likely test the 2010 low of 114-11 in January before testing the lower end of the 25-year long-term trend channel, roughly at 112-21, referenced in the main story. If the long-term trend channel is taken out, a larger and more dramatic downturn could ensue, though the 2009 low, 111-25, could provide a speed bump.
In the meantime, the fourth quarter weakness makes testing the lower end of that trend channel likely and there is plenty of room before it gets there.
Jack Broz trades from the floor of the CBOT and provides analysis on the bond market at TradeBondFutures.com.