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Bonds Suggest Real Estate Could Have A Grim 2022 - Investing.com

By Tim Knight Market Overview 5 hours ago (Jan 03, 2022 02:27PM ET)

Bonds are getting hit very hard on this first trading day of the year. This is pretty much as low as iShares 20+ Year Treasury Bond ETF (NASDAQ:) can go without breaking its intermediate-term uptrend.

For ten months, this line has held fast, but given today’s move, interest rates are ripping higher (which lines up with the general idea that the Fed is going to be cranking rates for years to come).

TLT Daily Chart.

TLT Daily Chart.

One sector strongly affected by this is homebuilding, since home affordability is closely tied to interest rates. Thus, as bonds fall, rates rise, monthly mortgage payments go up, and people are shut out of the market. Which is why we’re seeing hard reversals today in iShares U.S. Home Construction ETF (NYSE:).

ITB Daily Chart.

ITB Daily Chart.

And in the SPDR® SP Homebuilders ETF (NYSE:):

XHB Daily Chart.

XHB Daily Chart.

The chart that remains the most interesting is iShares U.S. Real Estate ETF (NYSE:), since it is sporting a very cool analog that I’ve written about two or three times already. The move we’re seeing lends some more credence to this analog, which suggests the real estate sector could have a grim 2022 ahead.

IYR Daily Chart.

IYR Daily Chart.

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