There is no doubt that the bond market is a bubble, although I do not see this bubble popping anytime soon. Fundamentally, the bonds are bullish with the fear of slowing still hanging over head, but until these change the downside should be limited and bought. This morning the bonds have little change at 148-20 after the ECB cut rates to 0%; I anticipate a short term rally back up to 150-152 with support at 14716. Even with the bullish fundamentals and an upside bias, the downside of yields (or upside in prices) should be limited from here. We should start to see demand diminish from government treasuries and move to corporate bonds due to the ultra low yields right now. Bottom line is the bonds should remain range bound between 147-153, with a slight bias to the upside. There are many ways to capitalize on this, whether it is trading the range with futures, selling out of the money strangles, or buying short term calls/puts when at the bottom/top of the range.
Series 3 Licensed
Frank D. Cholly
Senior Commodities Broker
Frank has been involved in many aspects of the futures business, from taking and placing orders to providing high-quality order execution service. As a second-generation participant in markets at the Chicago Board of Trade, Frank spent his early years working in the Treasury bond pit servicing both institutional and retail clients. He then expanded his brokerage duties and began covering a wide range of markets, including stock index, metals, grains and the balance of the interest rate sector. U.... Read More