A very unexpected crash in Treasuries in underway.
Risk parity, optimal portfolios, efficient frontiers: all go down the drain.
Because when everything goes down, it just goes down, like the droplets of sweat on the fund managers' faces.
A good deal of market moves that are deemed ABCs are, in fact, ABCDEs: w.A, then B, then a very weak C, followed by wave D, and completed by wave E, which accomplishes everything that wave C was not ready to do.
How far will wave E go? Bonds have been uptrending ever since the 2008 crisis, and in the case of 20Y treasuries the advance has formed an ending wedge. It is entirely possible to see wave E reach the lower quarter of this structure, ending at 100, or at least approaching it.
The time for this move is now: it should happen with the sell-off in the EUR, stocks, and EUR-crosses, the latter being so much correlated with bonds.
Because when everything goes down, it just goes down, like the droplets of sweat on the fund managers' faces.
A good deal of market moves that are deemed ABCs are, in fact, ABCDEs: w.A, then B, then a very weak C, followed by wave D, and completed by wave E, which accomplishes everything that wave C was not ready to do.
How far will wave E go? Bonds have been uptrending ever since the 2008 crisis, and in the case of 20Y treasuries the advance has formed an ending wedge. It is entirely possible to see wave E reach the lower quarter of this structure, ending at 100, or at least approaching it.
The time for this move is now: it should happen with the sell-off in the EUR, stocks, and EUR-crosses, the latter being so much correlated with bonds.