Treasuries on the Decline
As we speak, the iShares Lehman 20+ Year Treas Bond (TLT) is declining towards a test of
the 50 DMA, now at 88.64, which if violated, should
trigger downside follow-through to the rising 200 DMA,
now at 87.86. Truth be told, until Tues. (day before the
FOMCstatement), I was expecting the TLT's to climb
towards a retest of the Feb. high at 91.26. Instead, we
have just the opposite situation: a decling TLT (rising
long rates), at the same time the Fed appears to be
telling us that economic weakness should moderate
inflationary pressures. For the time being, the MARKETS
are warning us that they dont think the Fed necessarily
is undertaking the proper course of action, or that the
Fed is between a rock and hard place now. As the WSJ
suggested yest., the Fed cannot afford to aggrivate the
fragile housing sector on one hand, and yet it suspects
inflationary pressures have not yet been sufficiently
quashed-- but cannot do much about it. If such perceptions
intensify, then let's expect the long end of the bond market
(prices) to continue to decline (rates rise).
MJP 3/23/07 2 PM ET 88.79