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April 14, 2024 | Springtime for Bonds?

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.


The devastating bear market in Treasury paper since 2020 may be nearing an end. I was pessimistic about this myself when TLT, an exchange-traded fund, that tracks the long bond, broke down last week. But a bigger picture saw this as occurring in the context of a market that may have bottomed last October. The bounce from that low triggered a theoretical ‘buy’ signal in bonds in mid-December when it touched the green line shown in the chart.

Don’t expect a meteoric rise, however, since it could take a while for T-Bonds to build a base for a sustained move higher. Assuming the 107^04 low holds, however, the worst may be over. That would imply that long-term rates, currently at 4.53% for 30-Year T-Bonds and 4.38% for the 10-Year Note, have peaked. In any event, I do not expect them to exceed the highs they achieved in October at, respectively,  and 4.99% and 5.15%.

Debt’s Real Cost

I should point out that this is not necessarily cause for jubilation, especially if recession causes asset values to deflate. That would return us to the financial environment of the 2007-08 Crash, when even 4% mortgages placed a crushing burden on homeowners whose property values had gone underwater. It is real rates — yield minus inflation — that ultimately matter, not nominal rates. Unfortunately, there is no escaping the debts we have amassed publicly and privately, and there are reasons to strongly doubt that those who owe will get to stiff creditors via hyperinflation or even sustained inflation. Regardless, and irrespective of the nominal level of rates, payback will exact a heavy toll on future production and our standard of living.

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April 14th, 2024

Posted In: Rick's Picks

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