Last week the Chinese Ministry of Finance was unable to sell all of its planned issuance of 91- and 273- day bills. This is really a wake up call for governments not focusing enough on their debt. Now rumors are swirling that Chinese bond vigilantes are officially on the move. This begs the question…is the U.S. next? The United state’s debt to GDP is roughly 92% which is really not all that far behind the PIIGS. Locking up money for 30 years with historically low interest rates of 4% is not exactly a strong long term plan. Technically the daily chart of the 30-years Bond futures shows a “Butterfly Pattern” forming at these current lofty levels. Traders should know that Bond futures move inverse to interest rates. So if interest rates begin to climb, bond future prices will crumble. The Butterfly can be a major reversal pattern….as it was when the pattern formed at the lows of the S&P’s in March of 2009. This set up could come into play in the next few weeks. For more information on the buttlerfly visit our website at http://www.tradingliveonline.com

Kevin Riordan

This entry was posted on Saturday, June 12th, 2010 at 1:57 pm and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.