Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Do 10-Years Have What It Takes To Reach 2.00%?

Published 12/11/2019, 05:18
Updated 18/05/2020, 13:00

The US bond market is closed today in recognition of Veteran’s Day, so this is a good time to take a look at yields and try and determine where they may be headed next.

The Fed is on hold (so they say); stocks are near all time high. The way we have been taught is that when stocks go higher, bonds go lower. And if bonds go lower, that means yields go higher, right? Here is the 10-year yield, sitting just below the all important 2.00% level, at 1.94%. Why is this level so important? Theoretically, its not, but the market uses it as an important psychological level.

Therefore, because “the market” pays attention to it, we must too.

On Thursday last week, 10-Year yields broke above a year long (almost to the day) downward sloping trendline and on Friday closed right at previous lows (horizontal resistance) from early July. If yields can move 1.972, Thursday’s high, next stop is 2.00%. Above that resistance (in yields) would be at the 38.2% retracement level from the November highs last year to the September 3rd lows of this year at 2.116%.

US Government Bonds 10 Yr Yield Daily Chart

On a 240-minute chart, we can see clearly how yields broke about the highs from September 13th and pulled back to retest those levels. Yields failed to take out support and pushed higher into the close on Friday.

US Govt Bonds 10 Yr Yield 240 Min Chart
US 10 Y T-Note Daily Chart

On a daily price chart of the 10-year, price traded lower off the highs and ran into horizonal support at 127.678 (since this is the cash market, we will not quote it in 32nds). If price pushes below this level, it will correspond with 2.00% in yields. Next support for price would be at the 38.2% retracement level from the low on October 10th, 2018 to the highs on September 2nd of this year at 126.314. Resistance is back at the upward sloping trendline, near 189.594.

On a 240-minute price chart, price has formed a symmetrical triangle. Symmetrical triangles typically trade in the same direction as the previous trend, which in this case would be lower. If price breaks lower from current levels, the target would be 126.692, slightly above the 38.2% retracement on the daily. If price were to trade down to these levels, that should put yields somewhere in the 2.10% area.

US 10 Y T-Note 240 Min Chart

Will 10-year yields get above 2.00%? The stock market is open today and the S&P 500 is down about 6 handles at 3085. If stocks were to remain around these levels, 10-year yields could open unchanged to slightly lower Tuesday morning. But watch for a push towards the 2.00% level, as bulls (price bears) will want to test stops above that level.

Original Post

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.