The Federal Reserve has given bond investors another chance to sell bonds (to them) when they decided not to taper their quantitative easing asset purchases last week, even though tapering was widely expected. Ten-year Treasury yields have fallen back to 2.7% from 3%, and we do not expect yields to fall below technical support around 2.4%. Partly because of the Fed's ongoing accommodative stance, we expect economic growth to accelerate into 2014, which should eventually cause interest rates to rise above 3%. Thus, we see an opportunity to further reduce bond exposure in what we think is just a temporary pullback in rates.

David Fuller's view US 10-Yr Bond Yields have broken their progression of higher reaction lows shown on this daily chart, so we maintain that the early-September high near 3% is a peak of at least near-term significance. A clear upward dynamic will be required to indicate that this reaction phase is ending and that bond yields are firming once again. From an investment perspective, Fullermoney does not like this sector, maintaining that the May to September advance was only the first upward stage in a long-term bear market for fixed interest investments.

Similarly, 10-year bond yields for the UK, Germany, Switzerland, Sweden, Australia and Japan all show broadly similar patterns. This provides further evidence that the short-term momentum moves to the upside were overextended in early September. Tops of at least near-term significance have been seen.