Is the Next Major Bond Market Move Up or Down?

The 30-Year Long Bond Yield Is Still Hiding Its Breakout Direction Intent.

Those who though falling oil prices would relieve bond market pressures have been wrong so far.

$WTIC vs Long Bond Weekly

The long bond yield has generally headed the opposite direction since late 2023.

Big oil price gyrations did correlate briefly with bond market moves, but that stopped.

$WTIC vs Long Bond Daily

Between March 2026 and mid-June, the long bond yield and the price of oil had a positive correlation.

However that ended about June 22 with long-bond yields blasting higher.

As I type, the long bond yield is 4.99 percent up nearly 20 basis pints from the low.

Technically Speaking

Technically speaking, the monthly chart is in an ascending triangle pattern whose expected next move is higher.

The apex of the triangle is roughly 4.20 percent. There’s little room left in the triangle before decision time.

Fundamentally Speaking

Rising debt
Rising deficit (Trump wants more money for military spending)
Falling oil price
Expected moves lower in year-over-year CPI and PCE
Some tariffs have played out but others haven’t
USMCA uncertainty
Renewed chance of Mideast war
Jobs are more than a bit anemic, yet have not collapsed.
Very stretched stock market valuations
Price of rent appears to have bottomed and heading higher.
Fed Chair Kevin Warsh wants to reduce QE liquidity but has instead proposed studying the matter.

The technical picture is clear, but unresolved.

The fundamental picture is as clear as mud. I do not know how to evaluate that and no one else does either.

Yet …

Ignore the noise.

The next move in rates by the Fed will be a cut.

Have a nice day. pic.twitter.com/pMB0IPU4F4
— James E. Thorne (@DrJStrategy) July 5, 2026

Knowing the Unknowable

Thorne could be right, perhaps even for the wrong reason.

By that I mean Thorne appears to be a staunch Trump supporter and he sure isn’t hinting at recession.

The difference between Thorne’s position and mine is that I know there are things that I don’t know.

Here’s another clue.

CME Fedwatch Odds

CME Fedwatch Odds December 2026 as of 2026-07-05

Rate Cut: 0.00 percent
Stand Pat: 23.2 percent
At Least One Hike: 77.8 percent
Two or More Hikes: 34.9 percent

I see no reason to argue with that. But that does not mean it’s correct. If I have a reason to think otherwise, I am willing to say so, but what reason is there?

October is a different matter on which I do have an opinion.

CME Fedwatch Odds October 2026 as of 2026-07-05

Rate Cut: 0.00 percent
Stand Pat: 36.2 percent
At Least One Hike: 63.8 percent
Two or More Hikes: 18.3 percent

The Fed is going to be loathe to hike twice right before an election. And it will be very concerned about a hike on the October 26 meeting unless there is a raging inflation inferno.

There is no meeting in August, so the best shot for a hike is September or July. For September, there is a 53 percent chance of at least one hike. Two by September would imply hikes in July (21.9 percent chance) and September.

Odds of a Rate Hike Before the Election

The market odds are 63.8 percent of at least one hike. That may be slightly high if one discounts October. September is close to a coin flip.
The technical expectation is clear (but it could be wrong). The fundamental picture is a mixed brew of mud.
Practically speaking, neither the bond market nor the futures markets expect the next move is a rate cut, why should I?

Since nothing else is convincing, I believe the betting odds that the next move is up. If not, the most likely reason will be major job or economic weakness as opposed to everything coming up roses.

In this view, the CPI, PCE and job reports in July, August, and September will determine the outcome at the September 16 meeting, with the Fed on hold in October.