Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Technical Update - US 10-year Yields eyeing 5%. T-Note Future resuming downtrend. Euro Bund sliding
Kim Cramer Larsson
Technical Analyst, Saxo Bank
US 10-year Treasury Yields set for 4.50%, but eyeing 5%
Treasury Note resumes down trend
Euro Bund future sliding lower, could drop below 130
US 10-year Treasury Yields has been hovering around its short-term rising trendline the past week following a minor correction down to 3.90%.
Now uptrend seems to resume and will be confirmed if yields close above resistance at 4.25%, and if RSI closes above its falling trendline.
If that scenario plays out yields could extend its uptrend to the 1.382 projection of the October correction at around 4.50%.
However, yields could move higher going in to end year and 2023.
There is no strong resistance until around 5% which is the 1.618 projection of the 2018-2019 collapse is around 5.08% and levels not seen since prior to the Subprime crisis.
A spike up to 5.3% is not unlikely.
For yields to demolish the short-term uptrend a close below 3.89 is needed.
The US 10-year Treasury Note is testing its falling trendline after being rejected at the 0.618 retracement at 112. A close below October low at 108 26/32 will extend the medium-term and longer-term down trend. Likely down to the 0.786 Extension at 105 12/32 but could collapse to strong support around 104
The Euro Bund future seems to be trading in a slightly falling channel failing to test key resistance at 142.62. If Euro Bund keeps sliding lower and RSI closes below its rising trend line selling pressure is likely to accelerate and Euro Bund to test October low at 134.02 but is likely to trade lower.
If Euro Bund takes out 134 it is likely to extend the down trend the Fibonacci extension level at 130.66 possibly dropping to the 1.618 projection of the June to August correction at 128.91.
However, there is no strong support until around 119.86-121.06. See monthly chart
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