Premature to call for end of the bond bull

THE 36-year bond bull might be coming to an end soon but only after the 10-year Treasury yield breaks above the 2.93-3.05 per cent levels. Since 1981, the 10-year Treasury yield had been trading at a high of 15.8 per cent. After a prolonged period of zero and negative interest rate policy, the 10-year yield was eventually suppressed to a low of 1.32 per cent. Lately, there has been much chatter about how this bond bull has ended especially on the price action perspective. More specifically, Bill Gross and Ray Dalio declared that the 36-year bond bull has ended.

From the near-term perspective, the 10-year Treasury has risen a fair bit since October 2017. The most recent surge in the yield was the reason for the market calling the start of the bond bear market as the 10-year Treasury yield broke above the much-watched long-term downtrend line since March 1989. Moreover, the recent ascend also took the 10-year yield to a four-year high as it broke above the December 2016 high of 2.63 per cent.

However, we believe it is a little premature to call for the end of the bond bull now as the critical threshold for the bond bears is the 150-month moving average (2.93 per cent) and the January 2014 high of 3.05 per cent.