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Tuesday, June 11, 2013

Bond sell off

I have previously talked about TLT and its troubles.  There seems to be trouble in general in bond markets everywhere.  Here is a monthly chart of an ETF that is an aggregate U.S. bond fund.

AGG is breaking down below its monthly 18 SMA for the first time since late 2008.  There was a bit of sell off in late 2010 and early 2011, but that was short lived as the 18 SMA was reclaimed.  This looks like bonds are entering a bear market.  Here is a chart of EMB an ETF for emerging market bonds.

EMB also appears to be breaking down below its monthly 18 SMA.  The only other time it has traded below that MA since 2009 was in the recession scare during 2011.  That was short lived as it bounced right back. So far it appears it might be different this time.  Here is an international government inflation protected bond ETF WIP.

WIP is showing a very similar chart pattern.  It closed below its monthly 18 SMA in May and so far is continuing down.

There is definitely something going on in bond markets world wide.  Is it worries about the FED tapering QE?  Is it emanating out of the volatility in Japan?  I don't really know.  However, if it continues it will be a problem.  The global economy is already weak.  Rising interest rates will certainly not be good.  I wonder if it is the action in global bond markets that started the taper talk from the FED in the first place.  I could see how this would worry them.  The bond market is showing some fear.  Is this connected to the sell off in gold and big movements in the currency markets I have noted in past blog entries?  Will the increase in volatility in these markets spread into stocks?  There are some signs that could be happening.  Stay tuned.


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