One of our best indicators for fixed income applies the Coppock momentum formula to bond yields. Below, you can see a chart of this indicator applied to the 10 Year Treasury Note.
After hitting oversold levels (the green line) in the spring, Treausry bond prices moved sharply higher, bringing lower yields. If you go back and look at news stories during that time, we can ensure you that predicting an imminent decline in bond yields was going out on a limb. Then, those oversold readings from the spring gave way to overbought readings at the end of October. Since then, the yields on the 10 Year Treasury Note have already moved up 60 basis points in a very short period of time. Now, the big question is after yields have climbed 60 basis points from the lows, is the sell off for Treasuries over? If our bond momentum indicators continue to be as reliable as they have been in the past, you shouldn't bet on it.
To read today's full Market Comment, click here.
Mark Dodson, CFA
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