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The Great Bond Selloff

Equities were fairly quiet on Wednesday…

but the bond market saw significant selling across the board.

Many are focused on $TLT:

tlt daily stock chart

And I believe rightfully so. That was a multi-month top that completed the day before and saw followthrough on volume.

Keep it In Perspective

Some are saying that this is just a blip in the longer term picture.

And that’s possible, if you have a 20-year timeframe.

Heck, even $AAPL could drop 20% but on a 20 year chart the trend would still be up.

It once again comes down to your signal sensitivity. For me, I can’t think longer than a month out, so for traders this is news.

But it’s not just $TLT. Check out $LQD:

 

The lower study measures the day’s move relative to the 20 day historical volatility.

You can get the study here.

Yesterday’s reading was -4.63. That means it was greater than a 4 standard deviation move to the downside.

Just a blip? Nope– time to pay attention.

What This is Telling Me

Here’s what I think– in spite of this run in equities, there has been a “stubborn bid” in both safety products like treasuries and corporate bonds, as well as option premium as seen by the high premium in the VIX.

This week, it all gave way. Large selling in safety and protection.

It seems that we are finally entering the “acceptance” phase of the bull run we started in October.

by Steven Place

Steven Place is the founder and head trader at investingwithoptions.com/

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