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Trouble For Treasurys, The Technicals Tell

Tyler Durden's picture


Treasuries are resuming their bear trend, with 10yr yields pushing above 2.839%, the Nov-21 high and BofAML's MacNeil Curry warns "Treasuries are in trouble." They continue to target a break of 3.00% in the sessions ahead. This is the September/3m range highs. However, they are most focused on 5yr yields and TYH4 (10Y March futures). Remember, Curry cautions, with the MOVE Index turning higher, Treasuries are moving into a more volatile environment. Price action in the next week or so could be explosive. Of course, while the trend (and consensus) is your friend in this view, given the Fed's dominant position, there is always the chance of a short squeeze.

Via BofAML,

US 5yr yields are completing a 2m Head and Shoulders Base on the push above 1.449%/1.473%. A daily close above 1.449%, ideally 1.473% confirms this formation, targeting 1.670%/1.659% and potentially beyond.

We prefer to express this view by selling TYH4. It is completing a 2m Head and Shoulders Top on the break of 124-20+/124-14+. Downside targets are seen to 122-06+ in the weeks ahead. We recommend scaling into shorts at 124-14+ and then 124-20+, with a stop above the Dec-03 high at 125-07. More conservative accounts should wait for a daily close below 124-14+ (or a FRIDAY close to avoid event risk).

Sell TYH4 at 124-14+, then 124-20+, risking 125-08, targeting 122-06+


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Thu, 12/05/2013 - 14:36 | Link to Comment LawsofPhysics
LawsofPhysics's picture

No worries, there's a budget deal in the works.


tick tock motherfuckers.

Thu, 12/05/2013 - 14:45 | Link to Comment yogibear
yogibear's picture

It's called keep on extending the debt.

The debt is now $17.3 trillion. 

The debt will be $21 trillion before Obama's 4 years are up.

Thu, 12/05/2013 - 19:23 | Link to Comment CheapBastard
CheapBastard's picture

The Fed needs to buy 90% of T-Bills. That will fix the markets.

Thu, 12/05/2013 - 22:22 | Link to Comment tarsubil
tarsubil's picture

I wonder if treasuries will ultimately decide when the rug is pulled out of stocks. Create a panic for "safety" while shearing the sheep.

Thu, 12/05/2013 - 19:39 | Link to Comment Exponere Mendaces
Exponere Mendaces's picture

That's a sweet head-and-shoulders on the 10-Year treasury chart. Problem is, this market is probably as fully rigged as LIBOR was. How many primary knob-gobblers would have to collude with the Fed to make it so?

I bet its the only way they're keeping a lid on this thing.


Thu, 12/05/2013 - 14:38 | Link to Comment frankTHE COIN
frankTHE COIN's picture

Phil Ivey......... I see a Tell.
Phil Helmuth...I see a Tell.
Steve Liesman... We need more Data.

Thu, 12/05/2013 - 14:40 | Link to Comment Bam_Man
Bam_Man's picture

How the hell are the wise guys supposed to make money trading Treasuries with free money from the Fed when the yield on the 10-year is 1.60%? They can't. There is little to no coupon there nor potential for capital appreciation.

This is nothing more than the volatility REQUIRED for the wise guys to be able to make money trading these things. 

If you don't think so, go ahead and short TLT. You will be carried off the trading floor in a body bag in less than 3 months time when the snap-back rally occurs. And BTW, we will already be in the next recession long before the Fed ever gets around to "tapering".

Thu, 12/05/2013 - 16:52 | Link to Comment max2205
max2205's picture

It near a little research

Thu, 12/05/2013 - 17:04 | Link to Comment Bam_Man
Bam_Man's picture

It was 1.60% when this sell-off started.

Thu, 12/05/2013 - 14:40 | Link to Comment DeadFred
DeadFred's picture

Heavenly chart porn

Thu, 12/05/2013 - 14:40 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

The technicals mean nada if Janet Yellen says no taper.

Thu, 12/05/2013 - 14:45 | Link to Comment maskone909
maskone909's picture

well it does for the long end of the curve.  10year maybe not so much, unless it comes out and says fed will buy moar 10's and some 30's while they are at it. 

Thu, 12/05/2013 - 16:34 | Link to Comment Carpenter1
Carpenter1's picture

Yes, but the day will come when fundamentals matter again. Ol' Yeller surely will do whatever it takes to gain control of the market, but one day her printing machine just won't be enough.

Likely that day will be marked by a geopolitical event as cover to the psychopaths and liars who call themselves the elite. They are nothing of the sort, they are dogs.

Thu, 12/05/2013 - 14:42 | Link to Comment starman
starman's picture

we wish you a merry christmas we wish you a maaaaaaaaaaaaa

Thu, 12/05/2013 - 14:41 | Link to Comment Dr. Engali
Dr. Engali's picture

No worries.....Old Yeller and her magic printers will fix things.....but good.

Thu, 12/05/2013 - 14:45 | Link to Comment ebworthen
ebworthen's picture

C'mon 4%!!!

I want to see Ben with his head in his hands and the look of fear in Yellen's eyes!

Thu, 12/05/2013 - 14:46 | Link to Comment yogibear
yogibear's picture

The Fed can't taper.

Thu, 12/05/2013 - 14:46 | Link to Comment shanearthur
shanearthur's picture

O.T.: Tyler, have you ever heard of a 770 account? Are they legit or bs? Could you do a story about them?

Thu, 12/05/2013 - 15:27 | Link to Comment disabledvet
disabledvet's picture

I don't know what a "770 Account" is but I will look it up. As for why shorting equities (see below) remains a Fools Errand one must first look beyond the mere technicals of the Treasury Complex and start peering into the "fundamentalist" view that by the banks pulling back from te Treasury Complex they are creating a "spread product" with which to bid up their equity holdings "ad infinitum." this is not to say there won't be a sell off in equities...but the banks in spite of having the so called "balance sheets from Hell" and "he worst recovery in post War history" are doing just fine...and will continue to do so even with if we do get a correction here. In short (so to speak) I remain long treasuries (at the margin...caertainly not at the long end though) and hope to maintain this position through te first three months of next year...but we'll see. I'm not a big fan of "spread products" because even if the Fed is giving you free money "to lend out usuriously to everyone" still has not equated with growth at the generalized level. in other words I fail to be the immediate term...that anything other than an attempt a inflation is being created...not sales, not profits, not true growth. again I give this a few more months and then I'll be forced out of a thesis I have had for less than a year and one completely at a variance to the thesis I've held for the past 5 years. in other words "I'm not surprised I've been wrong." we'll see if the dollar surges providing some backstopping or not. one thing is certain...the value of free cash flow properly discounted (even "improperly" if seen through the eyes of a "Tesla" or a "Solar City") is certainly soaring.

Thu, 12/05/2013 - 15:03 | Link to Comment 999.9
999.9's picture

If the bond yields will be out of control they will let the stocks plunge to keep the yields under control.
I hope so because I am heavily shorting equities...

Thu, 12/05/2013 - 15:25 | Link to Comment Sonic the porcupine
Sonic the porcupine's picture

I think you're going to get roasted. The FED is not going to let equities go down. They will step in with MOAR QE.

Thu, 12/05/2013 - 16:06 | Link to Comment Dr. Engali
Dr. Engali's picture

It won't happen. When the fed even mentioned tapering both stocks and bonds sold off.I don't think that people understand the scramble for liquidity there will be in this highly leveraged environment if the fed pulls the plug on the market. If they do everything will sell off. There will be no safety bid in treasuries.The fed only has one choice and that is printing moar.

Thu, 12/05/2013 - 15:17 | Link to Comment besnook
besnook's picture

just making more room for the next round of printapalooza.

Thu, 12/05/2013 - 16:54 | Link to Comment max2205
max2205's picture

Stocks like rising rates but up till a point....I wonder if this last rally frontran that...oh wait

Thu, 12/05/2013 - 17:03 | Link to Comment e92335i08
e92335i08's picture

No way Fed will taper, rates would go right to 4%. Equities will get crushed. They're never going to get out rates will just bounce around here and we will keep going higher. 

I wanted to short this market in the high 1300's and realized you cant fight the free liquidity that just get long and take the easy money. There will be a day of wreckoning when the fed will lose control and equities will be a short of a lifetime because we all know the economy is really no better than late 2009 its all a complete fallacy.

The short trade will be when the Fed ACTUALLY tapers then get short and hold. Until then as much as I hate to say it BTFD. I think fair value is around 950 in S&P.

Thu, 12/05/2013 - 18:58 | Link to Comment Vint Slugs
Vint Slugs's picture

The people at Eidetic Research have had the call in on this analog since at least 2013.  Think maybe BoA's work may not be original.  Maybe credit should be given where credit is due:

Fri, 12/06/2013 - 05:16 | Link to Comment Fred123
Fred123's picture

Let me see.....treasuries are going to crash......I'm going to wait for gold to crash as well. But wait, everyone will be buying gold when treasuries start to crash.....yeah. Perfect time to destroy the gold

Fri, 12/06/2013 - 06:40 | Link to Comment Cdn1
Cdn1's picture

HEAD & SHOULDERS ! OMG....BAC pays the big bucks so we better sound the red alert!

Head & shoulders are everywhere but are best kept in the shower for guys who are all wet.

Is this the same technical analyst that saw 5 waves up in GOLD last month? He said BUY gold ...and he was very WRONG.



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