Govermentbonds
Gov and corporate do not provide the same safetyShown : 1 Month performance comparison between $TLT ( US LT bonds) and two LT corp Bond ETFs $VCLT $HYG.
I imagine many people switched to corporate bonds over the years because the yield on Gov Bonds was just way to low for them and instead of trying to adjust lifestyles we prefer to take more risks. So to some, it might be a surprise that these Corporate bonds can lose a lot a value quickly and do not provide the effect of saving you money in a nasty month as we have now in march 2020.
The DOW is down low 20% from an all-time high now so maybe a good time to adjust your corporate bond allocation a bit.
US Gov. Bonds (US10): Entering Selling Zone
US 10 year bonds is trading within a triangle pattern on a daily.
on 4H we have a perfect match of a harmonic bearish abcd pattern and a falling resistance line of the triangle.
based on this analysis I believe that the market will drop from the underlined area!
target levels are based on a horizontal structure and the triangle's support!
US GOV BONDS - Strong technicals ; sell it soonReally like the look of this, everything matching up perfectly. Unfortunately I'm not able to trade this with my broker, but for those who can, put this on your watchlist.
SHORTING US GOVT BONDSLet me warn you now, this is not a fundamental or technical analysis based trade. This is a speculation on my behalf based on a simple theory.
As the US Federal Reserve continues to rise interest rates up to 3x this year, is it time that a true bear market in fixed income has come to fruition? Are the "safe" government bonds becoming one of the worst asset classes to be in? I would say it is up there, with the exception of tech and anything blockchain.
It takes some basic algebra to figure out if bond prices will go up or down based on interest rate increases or decreases the PRESENT VALUE (Price) of the bond. In short, interest rates rise and prices fall, interest rates decrease prices increases. For most bonds, depending on default risk, upon maturity you are paid the face value. You have security in your principle if you can afford to wait. Another interesting component is that the longer the yield to maturity of the bond, the more sensitive to rises and falls in interest rates.
So with some Bonds 101 behind us, let me give you the trade. I propose that based on the projection that if interest rates rise three times this year as forecasted by the market, long term bond prices will decline in the short term (1-2 years), so I propose that, given the sentiment in the expectation of further increases in interest rates we short #TLT, a 20+ Year Govt Bond ETF sponsored by iShares.
Some things to be wary of:
If equity markets continue to fall, say to 20% down from highs, this could cause the federal reserve to STOP increasing rates. (speculation on my behalf)
As well, if the markets do fall and firms start to go under (smaller scale 2008), don't be suprised if they start to bail firms out, look at how rich it made the government after 2008...
Dodd Frank requires banks to be able to withstand up to 10% unemployment, $383 Billion in loan losses, as well as " heightened stress in corporate loan markets and commercial real estate." A fianancial collapse is probably not out of the question, but I'm saying that if any of the above scenarios start to play out, this trade would be out the window.
So yeah, bold bet for sure, but might be something to think about. Please, tell me where you think I could be wrong.
