Lack of FED Action Lifts Bonds

September 23, 2016 8:04AM CDT

Wednesday’s FOMC minutes announcement produces yet another “No rate hike” decision, sending equity indices and 30-year bonds soaring.  In the days leading up to the report, the market sold off more than 5 basis points in the Dec’16 30-year bonds in anticipation of a possible rate hike at the FOMC meeting.

As it played out, the FED continued to give the public more of the same commentary and outlook for possible action.  Yellen reiterated that the economy is improving, as she’s done so many times in the past, but agreed that the time is not yet right to raise interest rates here in the United States.

I believe the lack of action on the part of the FED will continue to allow both bonds and equities to rally under the current accommodating monetary policy.  The Dec’16 30-year bonds found a recent bottom just north of 164’000 and currently find themselves trading between 167’000 / 168’000.  The previous trading range in the bonds was from 169 / 172’000 and I anticipate prices to revisit this range at the very least.

Heading into next week, traders should continue to look for subsequent strength in the 30-year bond market with an initial upside target at 169’000 and secondary target at the upper end of the consolidation range, approximately 171 / 172.

30yr Daily

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