Why A New Long-Term Uptrend In Interest Rates Has Begun

U.S. 10-year treasuries (government bonds) interest rates have more than doubled since the low in the summer of 2016. The chart is very bullish indicating interest rates are likely to keep rising (baring a major financial crisis). The moving average pattern is the bullish 10-month, above the 20-month, above the 40-month, with the yield trading above the 10-month. The RSI is above 50. The MACD is above zero, and on a buy signal. The DMI is bullish with the D+ blue line above the D- red line and the black trend line has crossed the red line from below giving a more important buy signal.

Since the 10-year yield touched 3.04% on April 25th, it is on the edge of breaking out. For a breakout to be considered to have taken place, the yield needs to trade at least 10 to 15 basis points (a basis point is 0.01%) higher for several days. Admittedly, this is a somewhat arbitrary number. The long-term charts indicate this will happen, and as long as the bullish pattern remains in place, investors should be “buying the dips” in yield (or selling the peaks in bond prices). No matter how bullish a chart is, there will always be retracements along the way, and some of them will be significant.

The average investor can use ETFs to trade yields on the 10-Year Treasury. To do so, it is necessary to trade ETFs that are short the bond. TBX is a good choice for this. For those investors who are willing to take on more risk, DTYS, PST and TYO can be used. DTYS has a variable amount of leverage, PST is leveraged two times, and TYO is leveraged three times. 

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