John Kozey's  Instablog

John Kozey
Send Message
John Kozey is a Senior Analyst for Intelligent Analytics at Thomson Reuters, focusing on equities, derivatives and ETFs. John uses Thomson Reuters analytics to develop unique reports that blend fundamental and chart analytics on macro and individual topics for actionable ideas. John has been... More
My company:
Thomson Reuters
My blog:
  • 1% 10-Year Treasury Yield Still Possible 0 comments
    Sep 12, 2012 2:23 PM | about stocks: DLBL, DLBS, DSTJ, DSXJ, IEF, FSA, FSE

    One Percent U.S. Treasury Yield Still a Possibility

    Back in mid-May we discussed the chances for yields on the 10-year U.S. Treasury to move down to under 1 percent ( and for the video/text click down to May 15, 2012: We continue to believe U.S. Treasury yields will move down, now that they have corrected from a steep drop. Here are three reasons why this may happen.

    Reason 1 - "Measured Move"

    The move down in yield from 2.8% in August 2011 came on the heels of then-ECB president Jean-Claude Trichet's comments that the Euro-crisis could spread beyond the periphery nations of the European Union (Chart 1). The U.S. 10-year yield found a trading range roughly between a floor of 1.8% and a ceiling of 2.4%. The 1% drop should measure how far the ensuing breakdown from the 1.8% zone should go, which is actually down below 1.0%. Things seldom work out perfectly, so let's call it at least a 1.0% objective.

    Chart 1.

    Reason 2 - the 40-week (200-day) average has been tested

    Chart 2 shows that Treasury yields moved up to their 40-week moving average, a proxy for the technically important 200-day moving average, and have fallen back so far. At this point, yields have tested their longer-term moving average and show a downward bias for now.

    Chart 2.

    Reason 3 - Fibonacci retracements

    The daily data from Chart 3 shows the Fibonacci retracement of the drop that began in March. Note that yields retraced less that 50% of the move lower, which again seems to favor lower yields, rather than higher yields, although not so weak as to have failed to penetrate the lower 38% retracement level.

    Chart 3


    One reason this may not hold technically, is that yields may be in a bottoming process. Chart 4 does show that the 40-week moving average is close to the current rate, so a trend change is not inconceivable. One example of where this did not work was earlier in 2012, when it moved above the 40-week average for a bit before falling back.

    Chart 4

    In summary, a lower 10-year U.S. Treasury yield appears more likely moving lower, or best-case, sideways in the future. It is hard to find reasons today that would justify a "melting up" in yield. With so many sovereign governments and central banks continuing to intervene in markets, we do not see a potential for higher yields.

    Link to original article on

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Back To John Kozey's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.