From the Desk of Ian Culley @IanCulley

G7 central banks are cutting rates – first Canada and now the European Union.

Will the Federal Reserve follow suit in the coming months?

Investors seem to think so…

US 30-year T-bond futures have posted positive returns six days in a row – their longest winning streak since April last year.

T-bonds also broke above a key polarity zone, triggering our buy signals from last month:

I’ve made clear my disdain for buying treasuries, so the long bond trade will likely be a winner. After all, the best trades are often the hardest to take.

But price is sliding back below our risk level following the May nonfarm payroll data. And a yearlong downtrend line continues to act as resistance. Until T-bond futures break through resistance, the downtrend remains intact,...

From the Desk of Ian Culley @IanCulley

No matter how you slice it, bonds are stuck in a downtrend.

Perhaps bonds are carving out a tradeable low. If so, we have our levels to trade against. But price is falling away from our entry orders, heading in the opposite direction.    

You just can’t buy long-dated U.S. Treasuries right now…

Check out the U.S. T-Bond ETF $TLT:

TLT is trading beneath a downward-sloping long-term (forty-week) moving average and a yearlong downtrend line. Long-term averages and trendlines epitomize the Keep It Simple Stupid (KISS) approach to trend analysis because they work.

We can also add a well-defined bearish momentum regime on the 14-week RSI to our bearish data point list. The lackadaisical bid for bonds reminds us that it’s far easier for an asset to fall on weak demand than to rise on dwindling supply. 

During...

From the Desk of Ian Culley @IanCulley

Rates are rolling over… 

And bonds are catching a bid.

After four months of steady selling pressure, US Treasuries are finally carving out a tradeable low.

Let’s take a look!

Regardless of duration, the following bond charts present an identical tactical approach.

Two key themes dominate these trade setups: entry points designated by price reclaiming the February 2024 lows and initial targets set at the December 2023 highs.

Of course, there’s always an exception…

Check out the US 30-year T-bond futures:

Like the following charts, we can measure our risk at a key pivot low from late February.

I like buying T-bond futures against 117’27. But instead of targeting the December 27th high of 125’30, I prefer to aim at a critical shelf of former lows at approximately 122’30.

If and when price manages...

From the Desk of Ian Culley @IanCulley

So far, the dollar-yen is playing its part with a little help from Tokyo.

Falling dollar, falling rates, falling dollar-yen…

That’s the mantra reverberating throughout the market. 

But will interest rates get on board?

Check out the US 10-year yield climbing within a four-month channel: 

The 10-year is reacting to the channel’s upper boundary after stalling 25 basis points short of its October 2023 peak. 

Those former highs and rising trading range mark a logical area to witness a near-term pullback.

Plus, interest rates are trending within a broader corrective wave, and momentum is posting a bearish divergence – two data points...

From the Desk of Ian Culley @IanCulley

Goldielocks’s soft landing is proving sticky.

Commodities are outperforming stocks and bonds. Interest rates are rising worldwide, and investors are anticipating increased inflationary pressures—not multiple rate cuts—this year.

In fact, inflation expectations are reaching levels not seen since June 2022…

Check out the Treasury Inflation-Protected Securities ETF $TIP vs. the nominal US Treasury Bond ETF $IEF ratio zoomed out twenty years:

Monster base. But I don’t think of this ratio in those terms. Instead, I use it to gauge investors’ desire for inflation protection. 

The perceived need to take action against inflation is heading back toward the upper bounds of a 15-year range, marked by the 2022 high and the end of the prior commodity supercycle in 2011.

Investors bracing for higher inflation makes sense as global yields rise and commodities climb.

Yet over the trailing three...

From the Desk of Ian Culley @IanCulley

Failed breakouts and trading ranges dominate the charts.

It’s a mixed-up, messy market environment wherever you look — bonds, stocks, commodities, forex…

US treasuries are a prime example, playing it cool with muted volatility and tight credit spreads while yields climb.

Perhaps the near-term rise in rates makes it difficult to grasp, but the US benchmark yield is actually chopping within a broader corrective phase.

Before we dive into the charts, I want to make two things clear: 

One, I am not an Elliottician or an Elliott Wave specialist on any level. And two, if you give five Elliotticians the same chart, you’re likely to get five different wave counts.

Nevertheless, my journey to earning the CMT designation exposed me to the Elliott Theory, and I find it prudent when examining the US 10-year yield.

So here we go…...

From the Desk of Ian Culley @IanCulley

Can we all give the rate cut debate a break?

Everyone is obsessing over the Fed’s rate cut plans. Meanwhile, interest rates are climbing to their highest level since early December.

Instead of following Fed gossip and what-ifs, focus on what is: Yields continue to creep higher as inflationary assets rip.

Check out our Global Benchmark Rate Composite, an equal-weight basket of Developed Market 10-year yields (Germany, UK, Canada, France, Italy, Spain, Switzerland, Japan, Australia, and the US):

Our global composite is holding well above the lower bounds of a yearlong range, catching toward the underside of a flat 200-day moving average. 

Yields on sovereign debt show no signs of an imminent collapse.

Could rates roll over in the coming quarters? Absolutely! 

But the data fails to support a falling interest rate thesis. In fact, the charts suggest quite the opposite…

...

From the Desk of Ian Culley @IanCulley

The Fed abides.

Three rate cuts remain the base case for 2024. Everyone had this scenario penciled in, including the bond market.

The US benchmark yield is holding at the same levels as last month. T-bonds are catching a modest bid. And bonds are…well, boring. 

Perhaps it’s not an ideal scenario for bond bears, but stock market bulls are welcoming the muted response…

The Bond Market Volatility Index $MOVE—the credit market’s equivalent to the VIX—is registering its lowest reading since spring 2022.

The last time the MOVE hit these levels, the Fed had yet to embark on its current hiking cycle. (We all know what followed—an epic downturn for bonds and stocks.)

But interest rate hikes seem irrelevant at this point. The conversation now revolves around cuts and how many we could expect by yearend.

It doesn’t matter whether we witness a cut later this summer or not. Investor positioning...

From the Desk of Ian Culley @IanCulley

A risk-on revival has captivated the markets.

Investors are rising to their feet…

They’re buying stocks. They’re buying crypto. They’re buying gold.

Hell, they’re even buying high-yield Emerging Market bonds!

Check out the Emerging Market High Yield Bond ETF $EMHY breaking to a new multi-year high:

I throw this EMHY breakout into the same camp as the Biotech ETF $XBI blast off — risk-on.

It’s downright impossible to hold a bearish outlook while investors dance with the riskiest bonds on offer.

If you actively trade bond ETFs, you gotta be long EMHY above 37. For me, the EMHY breakout isn’t a trading event. 

Instead, it’s all about the behavior behind...

From the Desk of Ian Culley @IanCulley

US Treasuries are taking a back seat to risk assets.

Bond market volatility is declining. Credit spreads are tightening. And Emerging Market high-yield bonds ($EMHY) are breaking out. 

Meanwhile, stocks are posting new all-time highs.

So, how high will interest rates climb over the near term?

My gut tells me not far — at least not in the coming weeks or months…

Check out the US benchmark rate finding resistance at approximately 4.33:

Last month’s high marks a logical ceiling for the US benchmark rate. 

Those former highs coincide with a key retracement level based on the run-up into the October 2023 peak. Plus, the 10-year yield paused at the same level for almost a month during last year's rally. That’s not a coincidence.

If the US 10-year breaks above 4.33, volatility will hit...

From the Desk of Ian Culley @IanCulley

Fed Chair Jerome Powell continues to rule the markets with an iron fist, mercilessly punishing any who doubt his supreme will. 

Or maybe I should stop daydreaming at my desk. 

Either way, this little fantasy is a helluva lot more entertaining than the monotonous uptrend in US Treasury yields. 

But I’ve found boredom – when not taken seriously – can lead to neglect.

That’s where process steps in to save the day. 

It’s hard for the market to catch us off guard if we’re constantly reviewing the charts.

And these next two bond charts demand our full attention…

First, the High Yield Bond ETF $HYG relative to the US Treasury Bond ETF $IEI: 

It’s an oldie but a goodie. I look at this chart every single day. 

It’s that important – not just to the bond market, but the entire marketplace, including stocks and...

From the Desk of Ian Culley @IanCulley

Whenever a fellow parent asks what I do, I tell them I comment on interest rates.

I’m not involved in the semiconductor industry or the AI revolution. I don’t rob community banks (a personal favorite, despite mixed reactions). And I certainly do not analyze fixed-income, forex, and commodity markets (that’s a show-stopper).

The only thing people want to know these days – whether they’re navigating Wall St. or Main St. – is where rates are headed. 

But no one seems to be listening to the one person who has a direct impact on the direction of US Treasury yields…