Treasury Trend Bearish Despite Bernanke Bounce

Treasury prices have seen some rallies in June and July and are up in the wake of Federal Reserve Chairman Ben Bernanke's July 21 testimony to Congress, but overall, I see the longer-term trend as bearish. Look to sell Treasury bond futures as investors gain confidence in riskier assets.

Stocks and commodities have been on the rise this year, and it seems clear investors and traders have recently been seeking out riskier assets as confidence in the economy’s prospects improves. Treasury bonds, which investors turn to as a safe haven during uncertain times, are being put on the backburner. Given the magnitude of government spending, people are also getting worried about the prospect of inflation, which is bearish for Treasury bonds. Treasury prices trade inversely to their yield. If inflation is rising, your real returns (reflected in your bond’s coupon payment) will decline. (more)