TLT 99.19 Target Achieved, New Pattern Emerging
Technical & Trade View
TLT Ishares 20+ Year Treasury Bond ETF
Trade View
99.19 Target Achieved, New Pattern Emerging
Bias: Bullish Above Bearish below 97.90
Technicals
Primary support is 97.90
Primary upside objective 101.13
Next pattern confirmation, acceptance above 99.50
Failure below 97.90 opens a test of 96.90
20 Day VWAP bullish, 5 Day VWAP bullish
Today’s New York Cut Option Expiries: 1.1695-00 (414M), 1.1800 (319M)
Institutional Insights
According to analysts at Goldman Sachs ‘ Inflation miss-fueled bond rally likely overdone.Through the week, Fedcommentary has suggested a strong preference to slow down the pace of hiking. The inflation miss—October core CPI rose 0.27% month-over-month,below expectations, with services inflation slowing somewhat more than our economists’ projections—makes the step down at the upcoming FOMC meeting more likely, though Fed speakers appear to have been laying the groundwork fora slower pace irrespective of realized economic data. Markets repriced FOMCOIS beyond this December even more aggressively, both bringing the peak rate back below 5% and pricing additional easing beyond the (lowered) peak. While The details of the CPI report suggest there could be some downside risk to our current projected CPI path, we do not believe this materially changes the risks of hike cycle extension. Outside of unanticipated activity weakness (that is as yet not visible), we see a fundamental inconsistency in this price action. While a deepening of forward curve inversion is indeed appropriate when anticipating a recession, given the underlying strength of the economy, we believe the Fed will need to raise rates above current peak pricing for that to occur; a higher terminal rate, in turn, is more likely if inflation remains uncomfortably high. Either Combination—a higher terminal rate, but current levels of inversion, or the current terminal rate, but less deep inversion—argues for both higher end-2023 forward rates a higher average level of rates over the next two years. In case of the former, the cuts being priced offset the hikes earlier in the year, leaving net Fed pricing for 2023 one of the least aggressive among G10’
TLT Ishares 20+ Year Treasury Bond ETF
Trade View
99.19 Target Achieved, New Pattern Emerging
Bias: Bullish Above Bearish below 97.90
Technicals
Primary support is 97.90
Primary upside objective 101.13
Next pattern confirmation, acceptance above 99.50
Failure below 97.90 opens a test of 96.90
20 Day VWAP bullish, 5 Day VWAP bullish
Today’s New York Cut Option Expiries: 1.1695-00 (414M), 1.1800 (319M)
Institutional Insights
According to analysts at Goldman Sachs ‘ Inflation miss-fueled bond rally likely overdone.Through the week, Fedcommentary has suggested a strong preference to slow down the pace of hiking. The inflation miss—October core CPI rose 0.27% month-over-month,below expectations, with services inflation slowing somewhat more than our economists’ projections—makes the step down at the upcoming FOMC meeting more likely, though Fed speakers appear to have been laying the groundwork fora slower pace irrespective of realized economic data. Markets repriced FOMCOIS beyond this December even more aggressively, both bringing the peak rate back below 5% and pricing additional easing beyond the (lowered) peak. While The details of the CPI report suggest there could be some downside risk to our current projected CPI path, we do not believe this materially changes the risks of hike cycle extension. Outside of unanticipated activity weakness (that is as yet not visible), we see a fundamental inconsistency in this price action. While a deepening of forward curve inversion is indeed appropriate when anticipating a recession, given the underlying strength of the economy, we believe the Fed will need to raise rates above current peak pricing for that to occur; a higher terminal rate, in turn, is more likely if inflation remains uncomfortably high. Either Combination—a higher terminal rate, but current levels of inversion, or the current terminal rate, but less deep inversion—argues for both higher end-2023 forward rates a higher average level of rates over the next two years. In case of the former, the cuts being priced offset the hikes earlier in the year, leaving net Fed pricing for 2023 one of the least aggressive among G10’
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