BTIG’s Krinsky: ‘Now is the time to buy bonds’

[BOND Word on Wooden Cubes over US Dollar Money Background]
Pakorn Supajitsoontorn

Jonathan Krinsky, chief market technician at BTIG, is urging investors to buy bonds now, seeing an “opportunity to buy duration” as he projects 10-year yields (US10Y [https://seekingalpha.com/symbol/US10Y]) will fall back toward the 4% level in the coming weeks.

The strategist also sees the iShares 20+ Year Treasury Bond ETF (TLT [https://seekingalpha.com/symbol/TLT]), climbing toward $90 over the same timeframe.

[TLT performance]
TLT performance (BTIG, Bloomberg finance )

The call comes amid a notable disconnect in markets where equities (SP500 [https://seekingalpha.com/symbol/SP500]), (COMP:IND [https://seekingalpha.com/symbol/COMP:IND]), (DJI [https://seekingalpha.com/symbol/DJI]) and oil (CL1:COM [https://seekingalpha.com/symbol/CL1:COM]), (CO1:COM [https://seekingalpha.com/symbol/CO1:COM]) have made dramatic moves while bonds have lagged, according to the strategist.

The S&P 500 (SP500 [https://seekingalpha.com/symbol/SP500]) has surged more than 10% since lows ten days ago, and WTI crude oil (CL1:COM [https://seekingalpha.com/symbol/CL1:COM]) has plummeted 22% from its April 7th highs, yet “bonds have only managed to rally modestly off recent lows,” with the 20+ Year Treasury Bond (TLT [https://seekingalpha.com/symbol/TLT]) still more than 4% below late February levels, he noted.

Krinsky outlined two scenarios that lead to falling rates. Either continued de-escalation in the Middle East pushes crude lower and risk assets higher, allowing bonds to rally, or prolonged escalation means “higher energy prices should eventually hit the economy, which means growth slows and rates should fall,” he said.

Technical indicators support the bond rally thesis, according to BTIG. The firm noted that 10-year yields (US10Y [https://seekingalpha.com/symbol/US10Y]) are “just starting to roll over as daily momentum flips negative,” while TLT (TLT [https://seekingalpha.com/symbol/TLT]) is “working through a small base” that could serve as a launchpad for gains.

Seasonally, rates tend to face upward pressure through April but “really start to fall in mid-May,” the note stated.

[US10Y]
US10Y (BTIG, Bloomberg finance )

The massive 21% decline in WTI crude (CL1:COM [https://seekingalpha.com/symbol/CL1:COM]) from recent highs, which occurred “coincident with the risk-on mood of equities,” has left oil with little support at the 50-day moving average, according to BTIG.

This environment creates ideal conditions for bonds to finally catch up to the moves seen elsewhere in financial markets, the strategist said.

Treasury ETFs: (TLT [https://seekingalpha.com/symbol/TLT]), (TLH [https://seekingalpha.com/symbol/TLH]), (IEF [https://seekingalpha.com/symbol/IEF]), (IEI [https://seekingalpha.com/symbol/IEI]), (SHY [https://seekingalpha.com/symbol/SHY]), (SGOV [https://seekingalpha.com/symbol/SGOV]), (SCHO [https://seekingalpha.com/symbol/SCHO]), and (BIL [https://seekingalpha.com/symbol/BIL]).

Bond ETFs: (AGG [https://seekingalpha.com/symbol/AGG]), (BND [https://seekingalpha.com/symbol/BND]), (VCIT [https://seekingalpha.com/symbol/VCIT]), (MUB [https://seekingalpha.com/symbol/MUB]), (MBB [https://seekingalpha.com/symbol/MBB]), (JNK [https://seekingalpha.com/symbol/JNK]), (LQD [https://seekingalpha.com/symbol/LQD]), and (HYG [https://seekingalpha.com/symbol/HYG]).

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