TREASURY ETF TESTS 200-DAY AVERAGE -- CORPORATE BONDS ARE HOLDING UP BETTER -- HIGH YIELD BOND ETF HITS NEW HIGH

20+ YEAR TREASURY ISHARES TEST 200-DAY AVERAGE... The recent rise in Treasury bond yields has pushed bond prices lower.   And especially bonds with longer maturities.   Chart 1 shows the 20+Year Treasury Bond ETF (TLT) falling to the lowest level since June.  More importantly, the TLT is bouncing today after recently testing its 200-day moving average.   What the TLT does in this potential support area should offer some clues about the direction of bond yields.   Chart 2 shows the 7-10 Year Treasury Bond iShares (IEF) also bouncing today after recently falling to a four-month low.   While Treasury bond prices have been under pressure of late, corporate bonds have held up much better.   That's especially true of high yield bonds.

CORPORATE BOND HOLD UP BETTER THAN TREASURIES... It's normally encouraging to see corporate bonds holding up better than Treasuries.    And they are.   Chart 3 shows a relatively modest pullback in iBoxx Investment Grade Corporate Bond iShares (LQD) over the past two months.  In addition, the LQD is trading back above its 50-day moving average.  High yield (junk) bonds are doing even better.

JUNK BONDS HOLD UP THE BEST... Chart 4 shows iBoxx High Yield Corporate Bond iShares (HYG) rising this month to the highest level since February.   That's a positive sign for them and the stock market.   When investors turn more optimistic on the economy, they usually sell Treasury bonds while buying or holding high yield bonds.   That's because high yields bonds are usually more closely correlated with stocks than with bonds.   The fact that corporate bonds are holding up better than Treasuries also carries a more optimistic message.   While Treasury prices are rising today, the 10-Year Treasury yield is down 4 basis points to 0.73%.      Chart 5 shows the 30-Year Treasury Yield slipping back below its 200-day line today.