Why Bond Yields Will Go Lower and Prices Will Rise

NEW YORK (TheStreet) -- The yield on the 30-year Treasury bond has risen a bit more over the past week, meaning it's now likely to pull back to the zone between 2.60% to 2.84%.

Because bond yields move inversely to prices, that means prices should rise.

This follows up and builds on the analysis last week on the 30-year bond yield that looked at its movements since the all-time low in January. That analysis suggested that after rising a few more basis points, the rise from the January low would be complete.

Once that pattern was completed, the expectation was that yields should retrace 38% to 62% of their rise, and pull back to the 2.52% to 2.72% zone in the ensuing weeks.

Because yields rose a bit more, however, the ideal pullback zone is now 2.60% to 2.84%.

Many investors are more comfortable using prices when looking at bonds, so last week's analysis also looked at the iShares Barclays 20+ Yr Treasury Bond (TLT), the exchange-traded fund that tracks longer-term Treasurys.

The forecast was that the ETF would rise, in a corrective bounce, toward the $126 to $132 zone.

After a slightly deeper decline, that bounce zone can now be refined to the $123.50 to $128.80 zone in coming weeks.

TLT Chart

TLT data by YCharts

As of last week, sentiment surveys show that as few as 8% of traders are now bullish on bond prices. This lack of bulls hasn't been seen since the third quarter of 2013. Following that herding uniformity (which is typically a reversal extreme), bond prices rose for 16 straight months to put in the peak this January.

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