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 & 2-years Treasury yields
Government Bonds 4 minutes to read
Kim Cramer Larsson
Technical Analyst, Saxo Bank
US 10-year Treasury yields has been in a falling trend since the early 1980’s forming a long falling channel (two dark blue parallel lines). In 2018 yields raised sharply breaking out of the channel only to dropping back below a few months later to lowest ever level below 1% in 2020.
Since the 2020 low the yield has been on the rise again breaking above the upper falling trend line.
Yields are now close to test the light blue upper trend falling line which is parallel shifted from the dark blue trend lines and placed on the 2018-peak at 3.25%. Coincidentally, the trend line is following the 200 monthly SMA (Simple Moving Average). Both will act as resistance.
Zooming in on the chart covering the past 5 years we can see the 10-year yields have formed an inverted Shoulder-Head-Shoulder pattern which was confirmed at January’s break above the Neckline around 1.65%. Shoulder-Head-Shoulder pattern is reversal pattern.
Moving higher yields are close to test the 0.618 Fibonacci level of the difference between the Neckline and the Head low. If yields move the entire distance of the Neckline to Head distance (green dashed arrow) it will be close to test the 2018 peak.
However, the 200 Monthly SMA and the falling (parallel shifted) trend line will act as resistance from where a minor correction should be expected.
If the 10-year yields break above strong resistance at the 2018 peak there is no strong resistance before 5.12%. Minor resistance around 4%.
The US 2-year Treasury yields are testing long term falling trend line. A break above is likely to push yields to test the 2018 peak at 2.86%
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