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We're in a New Climate of Rising Interest Rates Around the World

The bond markets are telling the story

by Alexandra Lienhard
Updated: December 20, 2016

In an interview recorded on December 19, our Global Opportunities Expert Chris Carolan explains which way bond markets around the world have been moving -- and which markets you should keep your eye on.

Alexandra Lienhard: I'm Alexandra Lienhard for ElliottWaveTV, and today I'm talking with Chris Carolan. Chris is Elliott Wave International's Global Opportunities Expert and the editor of EWI's Asian-Pacific Short Term Update and European Short Term Update. Hi, Chris, it's good to talk with you.

Chris Carolan: Great to be here, Alexandra.

Alexandra: The move higher in U.S. Treasury yields (and lower in U.S. Treasury prices) has been making headlines pretty much since the U.S. presidential election. But you're actually seeing significant moves in rates in other areas of the world, as well. Tell me a little bit about that.

Chris: Well, yes. Bond markets around the world have been moving. In the Asian-Pacific Short Term Update, we've been talking about the Japanese market where bond prices have been falling, but also last week in China the bond futures fell very precipitously, very sharply, and it's made headlines and that market is attracting attention now.

Alexandra: Now Chris, there have been other downside moves in bond prices, so what makes this one stand out?

Chris: Well, in Elliott wave terms, these moves are what we call impulsive. That is, they're strong and they're forming five-wave patterns. We're seeing that both in the Japanese bond market and in the Chinese bond futures. The impulsive moves tell us this is different than what we've seen in the past, when we've had normal pullbacks during the long-term bond bull market.

Alexandra: Now I want to pull something out from one of your recent publications. You recently wrote that, "This climate of rising rates around the world is expected to make for a much different environment for short-term moves and opportunities as we head into 2017." That certainly seems to add quite a lot of gravitas to the bond market moves. Can you explain what you mean by this?

Chris: Part of what we're seeing in Asia, which is very interesting, is there's now some separation between markets. It used to be that all the various country stock market indices moved relatively together -- and they're still doing that, but we're seeing more differentiation. In other words, the Singapore stock market chart doesn't look exactly like the South Korea chart any more. There's more separation, and I think as an analyst, it's an interesting time. I think it won't be just a question of the whole region moving together, but it's time to pick things apart and really find what are the nuggets within a region and where are the places to avoid.

Alexandra: Thanks for talking today, Chris, and offering these insights, I appreciate it.