Pivotal Moment For Treasury Yields

After rallying since July Treasury yields have been forming a bullish consolidation during the last couple of weeks. The 10-Year Treasury Note yield in particular has pulled back to a key area of confluence from which the next leg higher in yields could begin:


10-Year Treasury Note Yield (Daily)


The confluence of the 38.2% Fibonacci retracement of the entire November 2015-July 2016 decline in yields, the 200-day moving average, and previous support/resistance make the 1.73%-1.75% yield area especially noteworthy.

The week ahead could be crucial as an upside breakout in yields could confirm that an important trend reversal on multiple time-frames began in July with potentially far reaching implications across multiple asset classes. Whereas, a break below the ~1.73% yield level would likely see a move lower to the next area of potential support between 1.63%-1.65%.

Last month bond king Jeff Gundlach called for a 2.00% yield on the 10-year Treasury before year end and while we haven’t quite reached his target the overall trend has been higher. When yields are coming off of such a low base we know that higher Treasury yields have a tendency to put downward pressure on other asset classes such as equities and precious metals. This is something to watch closely in the weeks ahead as both the S&P 500 and gold appear to also be at potentially pivotal turning points.

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