Bond Bear Antes Up

This article originally ran on July 27, 2005, and is being re-run in anticipation of the Fed meeting on Tuesday.

After one of their most volatile two-week periods in the last eight months, bond prices the last three tradings days have settled down like an overtired baby. The tension that's building over interest rates suggests that this consolidation period can't last forever.

As I mentioned in passing on Monday, I think the bond market looks vulnerable at current levels and the better risk-reward trade is to be positioned for a rise in yields. The yield on the 10-year has tumbled some 30 basis points in the last three weeks on a couple of weaker data points. It has also been goosed by a flight to safety as stock prices suffered steep declines over the last two weeks. But stabilizing stock prices have removed some weaker hands of demand for Treasuries.

Duck, Duck, Chicken

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