The bond rally that was sparked following the last FOMC meeting, which was construed as being dovish, has dissipated over the last three sessions. A steep sell-off in Treasury bonds that was sparked early Tuesday morning by ECB President Mario Draghi, continues today. Draghi hinted that the factors suppressing inflation would diminish, and consequently European policy makers would wind down their quantitative easing program by the end of the year. European Government bonds dumped on the news, and US Treasuries followed suit. It is widely expected that the Fed will raise US interest rates one more time this year. With central banks in the US and abroad showing confidence in their respective economies, and an intention to stave off inflation before it perks up, the fundamental picture looks bearish for bonds.
The technical picture shows support in the September 30yr at its current level, a band between 153’16 and 154’00. I would expect an initial bounce here, possibly up to 155’00. However, the initial downside target looks to be around 149’00 over the coming months.
30yr Treasury Daily Chart