Charts Not Encouraging for Bond ETFs

Perhaps this will change if, as expected, the Federal Reserve declines to raise interest rates this week, but for the moment, it appears some popular fixed income exchange traded funds are facing technical hurdles. That group includes the iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT).

Moreover, U.S. fixed-income market may find further support from overseas demand, especially with international bonds offering paltry yields. For instance, Japanese 20-year notes and the Danish 10-year bonds saw their yields go negative for the first time Wednesday.

Related: If Rates Rise, Look to These Junk Bond ETFs

The low yields in overseas markets have also helped support U.S. Treasuries as an attractive alternative source of yield for foreign investors. According to Fitch Ratings, a record $11.7 trillion of global sovereign debt has now entered sub-zero territory, reports Adam Samson for the Financial Times.

“For perspective, the monthly chart shows how TLT has traced a possible ending diagonal pattern since 2008. It also recognizes the boundaries of a channel. In recent months, price retreated from a test of the upper channel boundary and found support near the one-quarter channel harmonic. Meanwhile, the Lomb periodogram (a cyclic indicator) appears ready to turn downward,” according to See It Market.

Weakness in TLT should help the ProShares UltraShort 20+ Year Treasury (NYSEArca: TBT), which tries to reflect the -2x or -200% daily performance of the Barclays U.S. 20+ Year Treasury Bond Index.