What Happens if the FOMC Does This?

Hubert Senters here. Let’s take a look at the bond markets. A lot of questions concerning what happens if the Fed increases rates. Now, here’s how it’s supposed to work. It does not always work that way correlations are correlated until they are no longer correlations. So in other words they work until they don’t. Overall, if you’re following the fundamentals of the bond market if the FOMC raises rates then the bond futures will go down. So I’m looking at weekly charts in this situation so you can see that up here where we were trading like $168, we’re trading like $143 here. It looks like it’s going to go substantially lower to me. I think it’s going to go back all the way down to $124, that’s the thirty year. Let’s take a look at the ten year at TY. Ten year also just starting its rollover. You can see weekly it’s sold off, trying to get back above the cloud, just really couldn’t handle it and then went back below the cloud. I think it’s going to, you know, its next targets like $116 to $112 and then after that it can potentially fall all the way down here to a hundred so. As far as bubbles go, you know, bonds are definitely in a bubble and they’re just beginning to pop now. As the Fed raises rates both the shorter term and the longer term bond market and note market should go lower, so that is the thirty year, this is the ten year. Let’s take a look at the FV, this will be the five year. You can see that the five year also has a lot more that it can fall. And then let’s take a look at the two year. So there’s the two year so as you can see massive bubble from where the Fed actually inflated the bond market. It had to keep interest rates really low and doing that it bought a lot of bonds. Now, it’s going to raise rates. And it’s also unwinding its position in the bond market so these things will get a little squirrelly on you when they announce Fed and they may actually go in the opposite direction. But the longer term trade and the two year, the five year, the 10 year and the 30 year and the bund should go lower over time. So I hope that helps you. Good luck. Hope it helps. And I’ll see you on the next video. Hubert.