Forbes - The Bond Bear

Forbes came out with an article on whether its a good time to be a bond bear. They discuss some of the salient facts about bonds, which might have been bought for a higher price, but for lower yields, which then fetch a lower price going forward as the yields are lower than newer bonds that might come out, that this cycle might force prices lower. They also discuss some of the inverse ETFs as a probable trade on the bond market decline.

As you might see with the supplied chart, the bottom of the bond price can be a significant move to the downside.

Forbes

In November the bond auction for 30-year bonds was apparently abyssmal with some of the bonds postponed for sale being held over to this month's auction. There has been no news of whether the latest bond auction was successful, save that the CME raised margins on the 30-year Bond Credit Default Swap.

The 30-year Bond Credit Default Swap is a called an interest rate swap on the futures markets, even though it trades solely based on the bond price not the interest rate per se. So raising margins on this one particular heavily leveraged and highly liquid trade which has become a chaotic trade with volatile price discovery is basically a practical move and called for, despite the fact it could possibly have an immediate negative effect on the bond price.

The following is, by co-incidence, the contract that had its margins raised after the close on Friday:

http://quotes.ino.com/chart/?s=CBOT_I3.Z11.E

The latest hour that might indicate how the bond market will move is probably Tuesday, as the settlement date for the bond auction is Monday. A decline in the long bond market prices will move inversely to GBN.V share prices.

The weekly chart for GBN.V shows the best intermarket picture:

stockcharts.com

-F6