In about 2 weeks, the big bond rally of 2019 will officially be 1 year old (because it actually began in the 2nd week of November). This has been a uniquely interesting year for the bond market. Granted, there are plenty of other years with the same sort of big overall movement, blatantly obvious motivations, paradoxically subtle motivations, and uncertainty-inducing curveballs, but few have combined all of those components.
The uniqueness of the rally makes it hard to say exactly what might happen next. In fairness, it's usually stupid to try to predict what will happen next when it comes to financial markets. The long-term chart of rate movement is littered with the metaphorical corpses of traders who thought they were seeing a particular pattern only for the present day iteration to completely buck the trend.
With that in mind, let's talk about a potential pattern, but without assuming it necessarily means anything about the future. To be sure, more than a few traders are keeping a close eye on the breakdown of the long-term rally trend as it relates to moving averages and trendlines. Like us, they're smart enough to know that yields can whipsaw back and forth across moving averages at random, and that such breakouts are far from a guarantee of future movement.
What a moving average breakout CAN do for us, however, is serve to emphasize the point that a particular trend is "having second thoughts," as it were. The following chart shows one way to look at this with a quarterly moving average. The first "failed breakout" could also be seen as the first instance of "second thoughts." Notably, yields have yet to make another new low after that happened. Some would see the "more sustained breakout" as confirmation that the 2019 rally has fully matured.
The next chart provides another way to essentially arrive at a similar conclusion. The consolidation pattern that came into focus over the past few months is the most pronounced pennant/triangle of its kind during this rally. The fact that it is being broken this week is not lost on bond traders who follow trends and technicals.
While neither of the above charts confirm a shift back toward a rising rate trend in the bond market, they should at least serve as a suggestion that we consider the mortality of the 2019 rally. If you're not ready for rates to move higher yet, then root for a 2011 type of scenario where rates stayed sideways in a volatile range through the middle of the following year before ultimately going lower. That said, 2011 and 2012 were incredibly unique in their own right (apologies to my high school English teacher who said to never apply a qualifying adjective to the word "unique"), with forces in play that aren't likely to be seen ever again. Still, the similarities in the timing and pattern of 2019 vs 2011 cannot be denied:
What's the point of all this? Mostly just to advocate meditation on the fact that this rally won't last forever and that we may already have seen signs that 2019's lowest rates are behind us. From there, we can consider examples like 2011/2012 where the next round of lower rates wouldn't be too far away. As always, it will depend on the non-technical developments in the coming months (economic data at home and abroad, US/China trade relations, Brexit, geopolitics, and the global central bank response to all of the above).