Bond Market: Breakout Setup Position for the Yields

April 2, 2024, 2:46 pm EDT

Breakout Setup Position for the Yields

Mild inflation, about 2%-3% range, is a healthy environment for a country or people to live in peaceful economic conditions. 

However, this goal may be hard to achieve when instability is introduced through warfare, out-of-control momentary policy, etc. This is exactly what happens in today’s global society. 

Although the US Federal Bank wants to lower its Fed Fund rate this year, it is much harder than planning. The reason is simple. How can everyone expect to pay lower gasoline when wars are spreading out in Europe, the Middle East, and potentially Asia region?

Check out the Crude oil price reaching $85 per barrel again from $68 last December we can easily see the pressure of inflation. 

Energy prices are crucial to inflation because almost everything depends on its price to operate. Therefore, we can see the bond market is ready to respond to it. 

As we reported in 02/18 The Strengthening of the Yields (10 Years) article, we can see how the bond market is gearing up its position again for a potential breakout as shown in the featured chart. 

This inflation pressure adds to the stock market so it explains why Dow Jones tumbled more than 400 points today. 

In our opinion, the resurgence of inflation would terminate this bull market in an ugly way. 

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