By Rom Badilla, CFA
Given yesterday’s move higher past 1.66%, the yield on the 10-Year U.S. Treasury has pierced through support. Having said this, yields may probe higher.
The Credit Suisse technical analyst team of David Sneddon, Christopher Hine, Pamela McCloskey, and Cilline Bain expects the yield on the 10-Year to head higher. In their latest U.S. Fixed Income Daily, they wrote the following:
10-yr US yields had looked stretched and have now confirmed a base on the break above 1.66%. This allows for a backup in yields to 1.73% next. We would look for an initial hold here. Above targets firmer support at 1.80/82% – chart support and the 200-day MA. We would look for this to hold and to see a reversion lower again into the range. Only through 1.89/90% would a larger base be signaled.
Below 1.60/59% is needed to test the 1.54% September barrier. We expect this to hold and would look to fade any move here. Only below it would expose the bottom end of the range to 1.45/44% next.
The technical analyst team’s strategy shorted the 10-Year at 1.61% with Stop-Loss below 1.53% and a target for 1.79%.
Like the 10-Year, the Long Bond has breached support and may continue to sell off which equates to higher yields:
The 30yr has resolved the former sideways range higher on the vault above 2.86%. The breakout has confirmed a base and opens up further weakness to 2.94/95% with a better support at the 61.8% retracement level at 2.99/3.00%, where we would look for buying to emerge. Only through here would allow a test of more important levels at 3.10/125% – the 61.8% retracement of the 2012 rally and trend/chart supports.
Immediate resistance remains at chart and retracement hurdles at 2.80/77%. Below here is needed to see strength extend to 2.70% ahead of a bigger test at the September 2.65% chart low, which we look to hold.
The Credit Suisse team of analyst reversed a long position to short at 2.86%. They are targeting the 30-Year U.S. Treasury for 2.98% with a Stop-Loss below 2.82%.
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