Reasons for Believing in the Bond Market Bottom
The breakout above the 200-day moving average for 10-year Treasury note Futures indicates a potential trend change. The break is accompanied by a break of the 100 level for the MACD-v indicator, which suggests strong momentum. This breakout differs from previous false breakouts as it shows technical momentum reasons.
- The MACD-v indicator being consistently above 100 adds validity to the breakout.
- The current momentum high at 116 is a new high for the past three years, indicating further potential upside.
Seasonality and Historical Factors
The bond market has been moving counter-seasonally since October, suggesting strength beyond its usual bearish period. A new momentum high after three years indicates a potentially valid breakout. Seasonality usually bottoms out around late December and remains positive into February, providing additional support for a bullish outlook.
Bonus Reason: Potential Fed Policy Reversal
Speculation about a possible reversal in U.S. Federal Reserve policy may lead to rate cuts in the future, historically causing bond market rallies ahead of such changes.