Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Follow the (Bond) Money

By

PrintPRINT

Two months ago, the consensus was that long bond futures had formed a major top around 114. As we all know, the consensus is rarely right for very long.

One of the indicators that could have tipped traders off to this last leg higher was the interaction between commercial hedgers and small speculators in long bond futures. In a relatively rare move, commercial traders were net long the bond futures throughout April, while small speculators were net short. Basically, this means the "big boys" were looking for bonds to rise in price (decrease in yield) while the "dumb money" was shorting bonds, assuming a major top was in place.

The chart below shows the combination of commercial vs. small spec positions -- if the variance (the tan area) is above zero, then commercials are net long and/or small specs are net short. While not perfect, especially on the sell-side, this information would have tipped you off to every major rally in bonds for the past three years, including the most recent one. Currently, the variance is back below zero, but is not particularly extreme. This, taken in a vacuum, suggests that while it is not necessarily a good time to buy bonds (for price appreciation purposes), it may be too early to short.

NOTE: Bond "price" in this chart is simply the yield subtracted from 100.

No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE