The price of the U.S. “long bond,” the 30-year Treasuries, is down 50% since 2020. The corresponding rise in interest rates has been reshaping the financial landscape. When might interest rates come down? Watch Market Trek host Brian Whitmer give a one-of-a-kind, Elliott wave-based explanation that has nothing to do with the Fed or economy.
Hey guys, Brian here. I hope your week is going great.
In this video, I just want to share a few insights from a free report we just released. You can download a copy using the links below, but I want to talk about treasuries today.
This is supposed to be a safe haven asset, but long bonds are now down more than 50% since March 2020. This selloff is changing the investment picture in some important ways, and we’ll talk about how it’s changed and what we are looking at now. Stay with me.
All right guys, welcome back. And let’s just go ahead and put up this chart first and foremost. This is just a spread between volatility on a long Treasury ETF and volatility on an S&P ETF.
So, what it shows is that, relative to stocks, volatility in treasuries — highest in 21 years! Again, this is supposed to be the world’s safe asset, and treasuries are, at the moment, way more volatile than equities.
In addition to volatility, there is this chart showing the issuance of treasuries. Blue line here is marketable debt pushed to 14 trillion. The gray bars are the six-month change in outstanding net debt. That is pushing toward two trillion.
So, what we have is essentially soaring supply at the same time we have soaring volatility and falling demand. And these trends are steering investors away from the treasury market.
That, at least, is the mainstream explanation: supply and demand. Feel free to take it or leave it.
We approach things differently. We look at markets in terms of waves of social mood, and that’s why we’ve been showing this chart. It is the five-wave decline in long bond futures. It’s a classic impulse wave. Prices have moved ahead of the mainstream narrative that revolves around supply and demand.
Our view is that once this wave is complete, that’s going to mark a larger degree bottom, and then we’ll see the largest countertrend price rally. So, it’s a fall in yields, the largest since the March 2020 peak.
So, that’s where we stand in terms of Elliott waves.
You might think that this would be good news for the economy: If interest rates come down, it’s easier to service the outstanding debt. We actually think it’s going to be quite the opposite, and we get into that a little bit in this free report.
So, don’t forget to download. Use the links below, and thanks for watching.
Free, see more insights inside our new report “Essential Investor Insights” >>