Treasury Bond Capitulation?

Well, the bond market has sold off quite considerably over the last couple of weeks. The treasury keeps flooding the market with new paper to fund government's giant budget for this year. It appears now that yields are getting attractive enough for the stock investors to lock in their profits and move into the "safe" inestment of us treasuries. Commodity investors will also probably lock in their profits from over the last couple of months in the short term and move into treasuries as well. This should give the treasury market a little bit of relief over the short term, but it wont get it out of the woods.

The dollar continued to drop this week falling heavily against all major currencies. From a charting stand point, there have been some major techinical breakouts by several different currencies versus th dollar. This weakness is finally starting to cause have an effect on commodity prices like gold and oil. Clearly looking through the charts, one can see that we are due for a relief rally in the dollar which should put pressure on commodities.

The currencies that I like are the New Zealand Dollar, Australian Dollar, Canadian Dollar. I do not know a lot about those currencies, but the charts look great. I do personally own the Norwegian Krone, it is my favorite, due to the fact that Norway has no national debt, and its currency is backed by oil. You can invest in foriegn currencies through a bank called Everbank. Just do an internet search and it will show up. They also let you invest in paper gold and silver.


Gold hit 975 by friday afternoon, and oil closed at 66$ a barrel. These charts are looking very toppy, silver also has nearly retraced to an old support area which should act as resistance. Having said all of this, everything is pretty much in place for a sell everything commodity and stock based and move the money into cash and treasuries, and go and enjoy your summer if you were lucky enough to buy into these things in feb/march.

My forcast for the rest of the year is for a sell of in the stock market/commodity markets over the next month to month and a half and then the rally should resume and work its way up to the levels that they currently at. They may push a little higher but I would not bet on it. The new forclosures in the commercial real estate market will start to show up negatively on banks balance sheets later in the year, and that will probably give us another potential crash scenario like we had last fall.

It will be very interesting to watch the bond market over the course of the year as the treasury auctions more debt onto the open market. This week was scary at times how quickly rates moved up. But now that the rates are higher, it should draw new money back into treasuries for a while.

Overall, despite the rally we will surely get over the short term in bonds, we are still in the early stages of a securlar bear market for U.S. bonds, and things are going to get a lot worse over the next couple of years. Interest rates are going to go through the roof. The only way for things to turn around for the bond market is if the government would finally gain some kind of fiscal responsibility, cut the budget, raise taxes (nobody is a fan of this one), and to move away from the consumer based economy that we have become, and become a producer once again. The government is trying to avoid this route because it is the painful one, and politicians will lose their popularity because of it.

I had a lot on my mind, sorry for being so long winded.

Cash21