When Will Bonds Break Free of the Long-Term Consolidation?
When Will Bonds Break Free of the Long-Term Consolidation?.
I asked if negative sentiment in bonds was a reason to buy in a May 14, 2026, Barchart article, when I concluded with the following:
I favor a long position in TLT as sentiment in the U.S. government bond market remains overly bearish. At $84.73 per share, the risk-reward ratio of the trading range favors the upside by nearly 1:12 based on the range since 2024. A short squeeze in the U.S. long-term bond market could create a profitable environment for long TLT positions at $84.73 per share.
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In mid-May 2026, I favor a long position in TLT with a stop below $82 and, if the U.S. long bond futures fall below the 107 level. The path of interest rates over the coming weeks and months will impact commodity prices as financing production and inventories depend on rates. Moreover, higher rates tend to impede economic growth, while lower rates support it.
The long bond futures were at the 112 level on May 13, with the TLT ETF trading at $84.73 per share. On July 20, the bonds were lower at 110-25, with the TLT trading at $83.98. TLT fell to a low of $82.77 per share on May 19 but did not fall below the stop level. I remain cautiously bullish on bonds and TLT in July 2026.
After the 44.1% decline from the March 2020 high of 191-22 to the October 2023 low of 107-04, the U.S. 30-year Treasury Bond futures have traded in a narrow range.
The 7-year monthly chart shows that the long bond futures settled into a 108-17 to 127-22 trading range since November 2023. At 110-25 on July 10, 2026, the bond futures were not far above the low end of the range.
After the 54.1% decline from the March 2020 high of $179.70 to the October 2023 low of $82.42, the iShares 20+ Year Treasury Bond ETF (TLT) traded in a narrow range.
The 7-year monthly chart shows that the TLT ETF has settled into an $84.02 to $101.64 trading range since November 2023. At $83.97 on July 20, 2026, the TLT was below the low end of the range and just above support at the October 2023 low of $82.42 per share.
The case for lower interest rates over the coming months includes:
WTI crude oil prices have declined from nearly $120 to below $82 per barrel, which could lead to lower inflationary data over the coming months.
The Fed has left short-term interest rates unchanged throughout 2026, but Chairman Kevin Warsh could change the Fed's monetary policy approach, which favors the Trump administration's desire for lower rates.
The long bond futures and TLT have remained above their October 2023 lows, which are the critical technical support levels.
Homeowners locked into fixed-rate high-interest loans could refinance, leading to lower monthly payments.
Financing costs for the nearly $40 trillion U.S. debt will decline as interest rates fall.
