Inflation cools off, rate-hike bets collapse — long Treasury bonds
Bond traders were aggressively betting the Fed would raise interest rates this month. Then June inflation data came in surprisingly cool, causing an immediate reversal of those bets and sending Treasury bonds higher.
Idea
Markets were pricing in a high probability of a Fed rate hike, which had pressured bond prices lower as traders positioned for tighter policy. The unexpected drop in consumer prices caught many of those traders off guard, forcing them to buy bonds to cover their bearish bets. This short squeeze dynamic, combined with a genuine shift in the fundamental outlook away from rate hikes, provides a strong tailwind for intermediate-term Treasury bonds. With odds of a July hike dropping to just 20%, the momentum has shifted in favor of bond bulls.
Advanced analysis
Can TLT close the 1.1% gap to its 21-day EMA before the next inflation print, or will a structural flaw in the entry rules keep this trade permanently sidelined?
Is TLT close enough to its 21-day EMA to complete the bullish reversal entry, or is the setup still missing its final piece?
Can a cool CPI print actually push TLT through all four entry conditions simultaneously?