1/9
I've been asked about my stance on yields. Do I still think the 10-year yield is going to 5.00%—5.50%?
Yes
But I also took a neutral stance a few weeks ago.
75% of the move is over.
🧵
2/9
Where did 5.00% - 5.50% come from.
The belief is that the 40-year bond bull market is over (in 2020), and a multi-year bond bear market is continuing.
So, 5.00% - 5.50% is a higher high than the 5% peak of last October, as would be expected in a bear market.
3/9
That said, we did move our Index to neutral duration from being short since late last year. 75% of the move is over.
Recall we manage the Bianco Research Total Return Index. The ETF $WTBN tracks our Index (similar to SPY tracks SPX)
Explained here
biancoadvisors.com/may-2024-index…
4/9
Our index was 98 basis points ahead of the Bloomberg US Aggregate Index (bottom panel) through the end of April.
biancoadvisors.com
5/9
And here is how $WTBN is performing relative to its peers, as calculated by Morningstar.
morningstar.com/etfs/xnas/wtbn…
6/9
So if we moved to neutral, why still thinking that 5.00% - 5.50% is still possible.
No capitulation yet
Consensus Inc. surveys brokerage house reports. They divide them into two piles: bullish and "not bullish."
The chart started when the Fed began hiking rates.
7/9
So, the chart above has never been above 50% bullish, as bonds have been in a huge bear market.
That said, the current reading of 36% is slightly above the average of 33% since March 2022.
So, the thinking is 5.00% - 5.50% produces an extreme reading, then get long bonds.
8/9
Ditto the CoT report. Net Large Trader (Speculator) positions are on their average since the Fed started hiking in March 2022.
(Specs = holds 1,000 contracts and does not trade in cash mkt)
Move to 5.00% - 5.50%, and my guess is a capitulation, then get a long duration.
9/9
We are close enough to the end of this rise, so we moved neutral.
I expect a 10-year yield move to 5.00%—5.50% to produce extreme sentiment and set up a decent bond rally.
Will discuss more when/if we get above 5.00%.
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