Can 30 Year Bond Futures Hold Support? 30-year Bond Futures are currently trading in proximity to crucial support levels, with particular
emphasis on the 200-Day EMA, which has consistently served as a support level since the
beginning of the trading year.
Key Developments:
As 2024 commenced, the markets found themselves at a crossroad regarding interest rate
expectations. There were concerns about whether the bond market was preemptively factoring
in 150 basis points worth of cuts in 2024. Before the release of last week's Producer Price Index
(PPI), there was a 60-65% likelihood of an interest rate cut in March, and Fed Funds Futures
were pricing in 125 basis points worth of cuts.
The PPI for December revealed a deflationary trend, indicating a contraction in producer prices.
Initial expectations anticipated a 0.1% increase, but prices contracted by -0.1%. This report
prompted a shift in market expectations for interest rate cuts from 125 basis points to 150 basis
points, resulting in a current 73% probability of an interest rate cut in March.
Technicals:
Significant support levels will persist at the 200-Day EMA and the range of 122’15-122’30.
Additionally, we are observing an intriguing golden cross setup as the 50-day and 200-day
indicators are starting to converge. If the 50-day crosses above the 200-day, it would strengthen
the conviction for a bond rally.
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Disclaimers:
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*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
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