US Treasury Momentum in Oversold Territory

About a year ago, we wrote a post titled "Major Sell Signal in US Treasuries," which you can click here to read.  Today, however, following the reversal in momentum that we've seen since last August, our Long Bond Momentum Gauge (shown below) has crossed back into what we consider oversold territory (-20 in the chart below).

In effect, this is one-half of our signal to buy long-term bonds.  With all the Fed Tapering talk, obviously, the world is waiting on higher yields, but this momentum gauge has caught the "world" so flat-footed so many times that we've learned to trust the gauge, not our gut.  The other half of the signal to buy bonds would come when this indicator reverses directions.

This gauge looks at 40 years of data, and has seen 7 excellent buy signals.  We do eventually expect higher yields, but so far, the economic signs and the action of some commodity prices do not give much basis to expect higher yields at this point.

Don Hays

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