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Bonds Going Higher, But Yields Will Never Hit Zero

Published Wed, 09 Oct 2019 14:21:01 -0400 on Seeking Alpha

By Al Brooks, MD
The 30-year U.S. Treasury bond futures has an inside bar so far in October on the monthly chart (see below). September's low was above the August low and its high was below the August high. September is therefore also an inside month.

Consecutive inside bars (an "ii" pattern) is a Breakout Mode pattern. When they form in a strong bull trend, there is usually a bull breakout. However, they represent balance. Consequently, the upside is frequently small. They therefore often form a Final Bull Flag.
That makes sense because the sideways trading indicates that both the bulls and bears believe the price is fair. A breakout above usually gets pulled back into the ii within a couple of months.
What happens if October goes above September instead of remaining an inside bar? The same result. September is a bear bar in a buy climax. It is therefore a weak buy signal bar. Traders will expect more sellers than buyers above its high.
Consequently, the upside is probably small over the next couple of months. This is true whether October goes above September or if there is an ii bull flag.
Interest rates will not hit zero Wall St. often likes catchy phrases. Most have a small element of truth. However, most end up as not true. A recent example is, "Gold to infinity and interest rates to zero."
Interest rates to zero requires bond prices to go to infinity. No one expects that, but some expect gold and bonds to go much higher.
I doubt U.S.... Read more