US Notes&Bonds Analysis

I’ll open up a US Bond Thread…

This is the IEF 7-10 yr Treasury Daily. This is a trough only analysis based on bond prices and not yield.

Price is rising from a nominal 20 week low in May. The subsequent nominal 5 wk low in June. Price is at the 5 week VTL. A break of the June low with a FLD cross should indicate the top has been seen for the 10 week cycle.

IEF Daily

The 30 year is in a better position and the short end close to the June low.
There has also been a 8-week High-High cycle that peaked last week.



Finally, someone else on this forum who cares about bonds! Agree with your assessment about the yield curve. Expect continued short end weakness and long end strength (prices), which is producing a twist in the yield curve. I’ll post something on this later today.

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Below is a chart of the 10 year Treasury yield monthly since 12/31/1980, default nominal model, peaks and troughs, no pinning. I prefer to use yields rather than prices for Treasuries because the lows coincide with lows in stocks. I’ve looked at it both ways and it really doesn’t matter much.

All of the long-term charts I have posted recently (stocks, crude, Treasury yields) are starting to look similar with big troughs in 2020. Commonality in highly (or negatively) correlated asset classes can be used as cross-confirmation when trading or investing.

Weekly picture (corrected chart from earlier post). Does this bode well for stocks? It’s a good bet if the highs aren’t already in, they soon will be.

Daily view. Strong like bull.

Here’s the money shot. The slope of the Treasury curve is flattening dramatically due to short rates rising and long rates falling. When the slope gets near zero or negative, bad things happen (recessions). At this rate, we’ll be there by fall but the market will start pricing this in sooner. We are very late in the cycle for everything except fear and adult diapers.

Treasuries are like copper. It’s one of the smartest asset classes around and typically leads at major turning points. Even if you don’t trade bonds, it’s a market that’s worth watching.


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Here’s a qualitative follow-up on global yields curves. A number of emerging market government bond yield curves are inverted including China, Mexico, Brazil, and Colombia. Caution should be taken with all emerging markets and any highly correlated asset classes.

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Hi Alain,

Sorry for my ignorance. Are those straight lines VTLs? Hard to see on your chart. Will follow up with two even longer data sets on rates tomorrow. In the meantime, look at TLT since 2010 using your envelopes. Two very nice, consistent price waves completed and another one has started. Higher highs and higher lows are really all you need to know on this one.


hi Curt it is not very specific

yes it is a VTL - the 40 day VTL - but it has no real use on a long term chart

it is given by ST

data are given by YAHOO

10 year Notes indicate 10 week cycle top. Though the 30 year is holding up better without any FLD breaks. For the candlesticks, abandoned baby on the TLT needs follow through tomorrow. 10 week low should arrive in mid July.

IEF Daily

Agreed but the trend is strong so if you blink you might miss it. 10 week FLD might be support. I am going to buy the long end after this pause. Should do well into the August low in stocks.

10 Year Notes Futures, TY

Day 39 marked the most recent low. Price is testing the 2.5 wk FLD. This could be a GH interaction or early A. The 1.25 wk FLD was crossed yesterday. Long IEF with a stop at the most recent low.

There have been only 3 cycles of the 2.5 wk cycle from the filter since the most recent 10 week low. I am not a filter expert and still learning. I would like to hear what others have observed. I have observed that the longest cycle due to bottom may shorten or lengthen based on the harmonic 2 degrees higher (shorter wavelength). For example the 10 week cycle may have 3,4, or 5 cycles of the 2.5 wk cycle. Hence, the double GH David has mentioned in the past. The 20 week cycle may have 3,4, or 5 cycles of the 5 week cycle.


Hi Bryan,

Bonds turned around right on schedule. Today looked like the expected Category A. Profit target around 3.5-4 points.

Here is IEF with the 20D nominal FLD. Like stocks, current bond cycles are running a little short. Lows and highs match up to the day over the last 20w cycle. Very nice. Importantly, the trend is still up with higher highs and higher lows.


Here’s a longer view of the 10 year Treasury yield with 10w and 40w envelopes. There should be two nice profit opportunities in bonds between now and early next year. The first is between now and about August 21 for about 50 bps in yield or 4 points in price as mentioned above. The August low in Treasury yields should correspond to the 18 month lows in stocks and crude.

I’m no filter expert either, but of the filters you’ve shown, it looks like the amplitude of the 10w cycle is driving price action. From my envelopes chart, the 18m cycle is definitely pushing price (yield). It looks like your FLDs might be a touch long for the current environment (I always struggle with using the historical average or current length).

I’m long too. Nice work.


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Just making an observation here.

IEF, GLD, and FXY 10 week cycles have been highly correlated.

Correlations are relatively stable over time but sometimes they flip for mysterious reasons, usually when big macro themes change. Bond prices are normally highly correlated to the dollar but are now correlated to gold. The yen has a tendency to appreciate during risk-off episodes because it is borrowed in the carry trade and there are forced buy-backs when risk assets fall. We’ve had anything but a risk-off environment this year although stocks haven’t done much since March. Equity traders often overstay their welcome and equity investors are always the last to get the joke. Smart money and hedgers positioning for risk-off? This has an aroma of political scandal and a loss of confidence in Trumponomics and the dollar. Worth watching because the news is only getting worse.

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Hi Curt,
Saw this interesting note from Tom McClellan. I’ll have to get back you on the bond market analysis. It is an important area for me now from an investing/risk management point of view.
Read: "Why Bond Yields Are Staying Low?"

Hi John,

Thanks for the above piece. I agree with the long term 60 and potentially even 120 year peak-to-peak cycles in bond yields. Care must used with the data though. Many data sets show one of the peaks in corporate yields around 1845 (Mexican War on McClellan’s chart) versus the correct peak of 1857 for Treasury bonds (I will post a correct chart from the best data source available later today). To his credit, McClellan labeled the peaks in the rate cycles correctly on his chart even though his corporate bond yield data show a different peak than Treasury yields. I typically start my long term bond yield analysis just prior to the 1857 peak in Treasury yields to avoid this issue.

The question in my mind is not the peaks but the troughs. The trough in 1900 was right translated by about 11 years so if you believe in a 120 year rate cycle this could also be happening again today (1857 peak to 1900 (first 60 yr trough) vs 1980 peak to 2023/2024 (first 60 yr trough?). My peak-only ST analysis in ICM mode with a starting date of just before 1857 confirms this (not shown). Flip the long term yield chart upside down and it makes a huge M-shape from 1857 to 1980 with 1920 as the midpoint. There are even mid-channel pauses on each side of this big 120 yr wave.

Interestingly, I ran a long term ST analysis on June 20 (above) for 10 year Treasury yields from 1980 (peaks and troughs with the default nominal model) and came up with similar results. A large trough in late 2020/early 2021 with another in late 2023/early 2024.

The only comment I have on McClellan’s use of ocean temperature data to help predict rates is that correlation does not imply causation. It is a common complaint I have with many cycle analysts who use sunspots, etc. ST will pick up a cyclical pattern if you have enough good data so why bother bringing in other potentially unrelated factors?



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Hi Curt.

I took that long term data you sent me and ran filters on it. The long waves separate very cleanly. I do not have enough data to accurately extract a 120 year wave. The 60 year price(rate) wave based on the filters turned up years ago but the rate continued to decline. Contrary to what McClellan shows, a price wave that long is not going to phase perfectly to equally separated lows. However, none of the prior three 60 year absolute lows was as right translated as the current data.

The 30 year wave is approaching a trough but it has phased to highs in the past as opposed to lows. The downtrend in rates since 1981 has been very consistent. There is a relative short, visually evident wave which has been making lower highs and lower lows since 1981! In my opinion it is that pattern that must change before we can short bonds for the long haul. The reason is that the net effect of all the longer waves and non-cyclical trend is down which manifests itself in the trend underlying the shorter wave.

I certainly agree with your comment about the cause-and-effect relationship between correlated cycles.


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The chart below was lifted from Bank of America. It includes accurate Treasury yield data from 1790 but only through the beginning of 2016. The source is GFD (Global Financial Data), which is the Street’s long-term data source of choice ($50,000/yr for a user license but supposedly it’s worth it). You can see modest differences between this data and McClellan’s, the most important of which are around the 60 yr peak in the late 1850s.

Below are long term Treasury yields inverted. A case can be made for 124 year and 62 year peak-to-peak cycles. This would imply lower yields through around the end of 2024. William, I agree long cycles like this don’t phase perfectly but this one is pretty darn consistent. My goal was simply to establish a rough estimate of when this powerful long-term trend of lower bond yields might end.

Have we been in a Treasury bond rally of this duration in the past? Yes, but not of this magnitude.
Can it continue? Yes.

I agree with John. If this deflationary environment plays out, it will have implications for almost every other asset class.


Here is a look at that 60 year wave using inverted data. Looks basically the same as your chart.

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