Look at the picture below. Look at it. Isn’t it strange?
Well, if you’re not a simple bond geek like me, maybe it won’t give you much of a boost. But when I explain it, maybe that will change.
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I’m unofficially spending the rest of 2026 addressing every misunderstood part of investing I can find and trying to demystify it. Not like 101 or anything like that. It’s more “They told you X but Y is happening, so let’s analyze it together.”
The stock market is taking its cues from the Iran war. Blockade of the Strait of Hormuz could disrupt oil (CLJ26) markets. Flows have stopped or become sporadic, raising risks because the bottom of the strait is riddled with mines and countries are arguing over who should do what to stem the flow. Or let it be. This has its own dangers.
Every rise in oil prices translates into a ripple effect on the stock market. Not to mention other commodities that have risen so much this year that all they can do from now on is fall.
Is it a mess? This damn strait!
The U.S. Treasury market has been a safe haven for decades. Although continued higher oil prices and the risk of higher headline inflation have caused long-term bond rates to rise slightly in recent weeks, I still view the Treasury market as a safety valve. For three reasons:
The bond starts with a payment to you. Coupon bonds pay an interest rate based on the money you invest. This differs from dividend stocks, where payments are deducted from the value of the stock. With bonds, if you hold it to maturity, you will get your investment back plus the income you receive. Simple.
If interest rates fall from here, Treasury bond prices will rise. This creates a “catbird seat” situation for bond investors. They can sell the bonds for a profit or pay income to the register every 6 months until maturity.
If interest rates rise (as they began to do since the war began), bond prices will fall. This may create some FOMO because a bond you bought at a 4% yield may now be available at a 4.5% yield. However, you can hedge against higher interest rates, as I did with my bond portfolio. how? Invest options in an ETF like the iShares 20+ Year Treasury Bond ETF (TLT), an inverse ETF like the ProShares Short 20+ Year Treasury Bond (TBF), or just trade around a core bond portfolio to try to own an ETF that rises when interest rates fall.
What I’m describing is essentially active bond management. You don’t have to practice as actively as I do, though.
Why would I want to teach you bond management? Because let’s face it. The past 20 years have been about one thing: stocks. But in the end, bonds deserve a long-term focus. Literally.
Bonds have entered a rare phase of internal disagreement. The 2-year, 10-year, and 30-year Treasury yields have been trading in a relatively tight pattern for months, but as of mid-March 2026, that synchronized dance has been broken. The main reason is that the sharp conflict between the Fed’s short-term policy expectations and long-term structural concerns has caused the three major benchmark maturity bonds to be pulled in completely different directions.
In response to the immediate threat of energy-driven inflation, two-year Treasury notes recently decoupled from longer-term Treasuries. As oil prices briefly topped $100 in early March, the market quickly lowered expectations for a rate cut by the Federal Reserve. For the first time in about three years, the two-year Treasury yield climbed above the effective federal funds rate, a sign that smart money is preparing for the Fed to keep interest rates lower for longer than anyone expected a month ago.
Meanwhile, the 10-year and 30-year Treasuries are being driven by a separate set of non-technological demons. Investors are now demanding higher premiums to lock up cash for decades, not just because of inflation but also because of a huge supply-demand imbalance.
There’s also the legacy of the debt ceiling. Persistent budget deficits have led the Treasury Department to issue record amounts of long-term debt, creating a glut of bonds that the market has struggled to absorb. The 30-year Treasury yield, which remains near 5%, is starting to price in a period of high inflation and slowing economic growth. This means that in a stagflationary environment, long-term bonds lose their luster as a safe haven.
Chart provided by Rob Isbitts via PiTrade.com
A quick look at the ROAR Score for the Invesco Equally Weighted 0-30 Year Treasury Bond ETF (GOVI), which I hold as a Tier 1 bond ETF exposure, and while its level of implied risk has fluctuated over the past 12 months, has remained within control. Lots of yellow zone action. This makes bond prices relatively stable over time despite falling and fluctuating prices.
The takeaway for bond investors is that the old diversification rules are currently on hiatus. In synchronized markets, bonds act as a hedge; in this decoupled market, they act as independent sources of volatility. But now, during this time of uncertainty, I’m looking for ways to use this to my advantage.
Bottom line: Bonds haven’t been this exciting in a long time, and most investors don’t even know what they have to offer, no matter where the next big move in interest rates is. This is a great time to learn. Because the stock market remains a place where investors are grasping at straws.
Rob Isbitt created roar scorebased on his more than 40 years of technical analysis experience. ROAR helps DIY investors manage risk and create their own investment portfolios. For Rob’s written research, check out ETFYourself.com.
On the date of publication, Rob Isbitts did not hold (either directly or indirectly) any securities mentioned in this article. All information and data in this article are for reference only. This article was originally published on Barchart.com
