In what may be one of her last public appearances before stepping down as Fed Chair, Janet Yellen made some very upbeat remarks about the US economy. Of note was her remark that this strength will warrant continued interest rate hikes. Treasury bonds have taken those words to heart Wednesday as illustrated by over a full point fall in the December 30-yr bond future contract. This move puts the price at 153’07 down about 7 tenths of a percent. The yield, which moves inversely to price, sits close to 2.82 percent, up from 2.765 the day before.
On the economic front Gross Domestic Product expanded at 3.3 percent in the 3rd quarter. This was the quickest pace of growth in 3 years. Economists are looking for a solid 4th quarter as well, in between 2.5 and 3 percent.
As mentioned in my last article, bonds are trading in a current range with 154-155 being the top of the range, and 150-151 being the bottom. It was also mentioned that traders should look to get short exposure near the top of the range. That still stands as the technical picture shows formidable resistance at the top of the range. There are various options and futures strategies that can be implemented, depending on risk tolerance, and profit objectives.
30-Year T-Bond Dec ’17 Daily Chart