TLTs Rallying - Market Analysis for May 29th, 2009

It is interesting that the iShares Barclays 20+ Year Treasury Bond ETF (NYSE: TLT) is rallying with the commodity sector today.  Yes, the TLTs are very oversold, so let’s not read too much into today’s strength.  However, I am suspicious that the strength just might be a reflection of anticipated Fed activity and buying interest in the long end – to prevent a back-up in mortgage rates and/or a derailment of fledgling economic recovery regardless of an increase in inflationary perceptions.  In fact, my sense is that Bernanke & Co. want inflation to pick up – and want perceptions about renewed inflation to become more ingrained in the American consumer’s psyche to make sure that deflation is defeated.  Perhaps Bernanke thinks that reversal inflation will be an easier task to accomplish than has been the struggle to reverse or present deflation?  In any case, the TLTs are in sling-shot recovery mode for a run at 94.00 next.