The 10-year yield settled at 3.83% in yesterday’s trading, well below the recent peak of 4.25% (Oct. 24). It’s premature to assume that rates won’t rebound and set new highs, but for the moment the market is taking a breather.
One factor to consider is the Federal Reserve’s ongoing efforts of tightening monetary policy. The rate hikes that began in March are the fastest in four decades and markets are expecting more hikes to come.
Fed, of course, can raise rates for reasons that seemingly defy real-time economic logic. That’s partly because of monetary policy, as Milton Friedman works with long and variable lags. As a result, it will probably take several more months at a minimum before the Fed is comfortable with assuming that inflation has peaked and is no longer a threat to the economy. And that’s assuming incoming inflation data behaves.
Meanwhile, the headwinds for further increases in the 10-year yield are comparatively strong, based on my modeling. The chart below shows the spread on the market rate for the 10-year less the average model estimate. This alone doesn’t ensure that the market rate can’t rise further, but it’s a factor that suggests that the upside bias for the 10-year yield has faded vs. recent history. The logic here is that the higher the 10-year rate rises over the average estimate, the higher the probability that the market rate will stabilize if not fall.
US 10 YR. T-BOND PRICE TECHNICAL ANALYSIS: WEEKLY CHART
In the weekly charts, US 10 YR. T-BOND is trading in down channel. Currently it is moving below 20 & 50 MA.
RSI is in selling zone, which indicates bearishness.
Its immediate support is at 112.00 & the resistance is at 113.21
US 10 YR. T-Bond will trade in down channel until there is trend reversal.
US 10 YR. T-BOND PRICE TECHNICAL ANALYSIS: DAILY CHART
In the daily charts, US 10 YR. T-BOND has started moving in down channel. It is currently moving above all the MA except 5MA.
RSI is in buying zone, which indicates bullishness.
Its immediate support is at 112.17 & resistance is at 112.68
US 10 YR. T-BOND can continue to trade downside until any reversal.