Bond market bounces back after panic sell-off — grab Treasury ETFs
Thesis
When the new Fed chair spooked the market with talk of raising interest rates, panicked selling drove bond prices down to unusual lows. However, investors are already stepping back in to buy the dip today, realizing the long-term outlook isn't as dire as the initial panic suggested. When bonds rebound this sharply after an emotion-driven plunge, they tend to climb steadily for a few days as the market finds its balance again.
Strategy approach
Construct a mean-reversion strategy for the 10-Year Treasury yield (US10Y) or a long ETF like IEF on the Daily timeframe. Entry: go long IEF when the yield is more than 2 standard deviations above its 20-day moving average (indicating an oversold bond market) and the RSI(14) crosses back below 70. Exit: close the position when the yield touches the 20-day moving average, or after a maximum 10-day hold.