US 10Y TREASURY: no more rate hikes?Fed Chair Powell's speech in front of the IMF audience in Washington had some impact on the Treasury yields, but it seems that the market is still not ready to take another rate hike for granted. Namely, Powell`s hawkish tone on a possibility of another rate hike if the inflation “reaccelerate'' had an short impact on 2Y Treasuries which moved back to 5%, but the 10Y Treasuries remained relatively flat, which provided some market confidence that the Fed is finished with further increases of interest rates. It is also worth mentioning that the US 30-year bond auction was held during the previous week with the lowest demand within the last two years.
The 10Y Treasury yields were moving relatively flat during the previous week, ranging from 4.6% down to 4.48%. Still, they are finishing the week at 4.65%. Charts are pointing to a probability for 4.8% to be tested for one more time. However, a move back toward the 5% yield, is highly unlikely at this moment. On the opposite side, the next support line stands at 4.4%, which is also pending testing in the weeks to come.
US10Y trade ideas
Another Inverted Yield Curve with Even More Predictive PowerThe Federal Reserve Chair Jerome Powell spoke again today at a Brookings Institution event. His comments sparked a rally in markets (likely including short covering) that pushed the S&P 500 SP:SPX up about 122 points, or 3.10%, to close at 4080. The Nasdaq 100 NASDAQ:NDX rose 4.58% on the day, closing at 12,030.
But the bond market is sending less sanguine signals. The 10Y/3M yield curve inverted further today. Its inversion is currently the deepest since the slightly deeper inversion of this segment of the yield curve in 2000-2001 inversion, which had presaged the 2-year bear market from 2000-2002.
The 10Y/3M curve has been researched more than the more widely known 10Y/2Y curve (also known as the 10s/2s). Experts say inversions of the 10Y/3M serve as better predictors of recession than the 10Y/2Y curve.
The yield curve has remained inverted for over a month now. This qualifies as a "persistent inversion" that creates a recession signal. But the recession does not always follow immediately. According to Jim Bianco of Bianco Research LLC, "The average lead time" until the recession arises "is 311 days, or about 10 months."
What does this offer for traders then? On days when equity markets are rallying like there is no tomorrow, it tells us that markets are not out of the woods despite the buying frenzy. It means that a recession is more probable than not in the next year. But it doesn't tell us much about where prices are headed in the near term (technical analysis of price itself works better for this purpose). Just because a recession will likely begin in the coming weeks or months does not necessitate that equity markets plummet in a straight line to the ideal target. Many, including this author, wishes it could be as straightforward and predictable.
So traders should also keep in mind that inverted curves are not a trading signal. They are part of the broader economic and rate-policy context within which equity markets operate. It helps me to know that markets are not likely to resume a long-term uptrend until the recession has ended.
The bond market tends to sniff out the problems in the economy long before other markets. And equity markets can ride on hope and desperation for much longer than anyone expects—just as this unexpected bear rally carried SPX price from the October 13, 2022 low all the way back above the 200-day MA today and higher to close at 4080.11.
Below is a chart of the 10Y/2Y yield curve, which is also inverted.
Supplementary Chart A:
To compare the current 10Y/2Y inversion with some historic inversions, consider reading this prior post from July 2022 on the 2s / 10s yield curve inversion, and be sure to hit the refresh button to see the most recent months of data. The Wall Street Journal Confirmed in recent days, by the way, that the 2s / 10s curve
Supplementary Chart B:
Finally, on a monthly chart, one can easily see that the 2s / 10s curve inversion is the deepest one on record—at least as far back as the chart allows. Hat tip to @SPY_Master for pointing this record-breaking inversion recently.
Supplementary Chart C:
US10Y ~ Intraday Analysis (2H Chart)TVC:US10Y intraday mapping/analysis.
US yields dip while bonds & stocks rip.
US10Y in clear downtrend with potential bearish H&S pattern developing, TBC.
H&S development would correlate with bonds/stocks pullback before further bullish momentum into EOY.
Left shoulder, head & neckline outlined. Right shoulder parameters:
Rally above ascending 1st trend-line (green dashed)
Resistance at 200SMA, gap fill, 2nd ascending trend-line (green dashed) + upper range of descending parallel channel (white)
Price action rolls over to re-test/break neckline & validate pattern
Prelim target = lower range of ascending parallel channel (light blue) + 50% Fib confluence zone.
Note: break of "neckline" before right should formation negates H&S = express trip to prelim target.
US10Y Extremely overbought on Bearish Divergence. Sell longterm?The U.S. Government Bonds 10YR Yield (US10Y) is having the first red month (1M) after rising non-stop since May. It has been on extremely overbought levels for the last 12 months as the price established itself above the multi-decade Bearish Megaphone pattern, the same way it was oversold below it following the March 2020 COVID crash. As you know the price quickly corrected back inside the Bearish Megaphone in a pure technical harmonization process of the extreme levels.
Technically it should follow a similar reversal now again, as the most important technical development of the year is October's Lower Highs formation on the 1M RSI. This is a huge Bearish Divergence as the price during the same period is trading on Higher Highs. The same kind of Bearish Divergence has only been spotted another two times in the last +40 years. On both occasions, an aggressive decline started. As a result it is only natural to expect a 1M MA50 (blue trend-line) test before 2024 is over, which right now is a huge early sell signal.
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Relationship between US 10yr yield & the DXYAs traders look for signals on potential moves in the FX market, a frequent question I receive is regarding the relationship between the 10yr yield and the DXY.
US 10-Year Treasury Yield:
The US 10-year Treasury yield represents the interest rate on the 10-year government bonds issued by the United States.
It is considered a benchmark for long-term interest rates and is often used as a reference for borrowing costs across the economy.
This yield is influenced by various factors, including inflation expectations, economic growth, and monetary policy.
US Dollar Index (DXY):
The US Dollar Index, or DXY, measures the value of the US dollar against a basket of major foreign currencies, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc.
It provides a snapshot of the US dollar's strength or weakness relative to these currencies.
Relationship of US 10yr yield & DXY
The US 10-year yield and the DXY have a relatively strong positive relationship.
Increases in the yield on 10-year Treasuries have the tendency to draw capital into the US bond market because investors find US government bonds more attractive with higher yields.
Because of the increasing demand for the US dollar to buy these bonds, the dollar gains strength leading to a rise in the DXY.
As with any relationship between financial instruments, it is seldom 100% positively correlated given that there are a variety of factors, including inflation expectations, economic growth conditions, market sentiment, and central bank monetary policy.
US 10Y TREASURY: yields have peakedThe final breakthrough for the US Treasury yields was the latest FOMC meeting where the Fed decided not to increase further interest rates. Although, they are leaving the possibility for further hikes in case that inflation remains persistent, still, the market perceived it as the end of the Fed's rate hikes.
At the beginning of the week, the 10Y US Treasuries tried for one more time to test the 5.0% level, reaching only 4.92%. There was clearly no market strength to push the yields further to the upside. After the Fed's meeting, yields dropped to the level of 4.6%, while after the Friday`s jobs data, yields ended the week at the level of 4.57%. There is still space for yields to relax and move to the downside. Actually the level which is currently pending testing is 4.4%, which might be tested during the week ahead. Further supporting level stands at 4.0%, but currently there is no clear indication on charts that it might be tested in the week ahead. Evidently, the yields started their reversal path, and they will certainly not return back to the previous levels around 5.0%.
US10Y - Is it a "sea change" or a strong buy for TLT and TMF ?In December 2022, Howard Marks told in an interview that a "sea change" is underway in markets.
When I have seen below charts of TVC:US10Y , I have remembered that interview:
(Unfortunately I needed to remove the graph due to lacking reputation points. Maybe you can view with //x/HZKlWa8U )
TVC:US10Y was in a downtrend in a channel since 1980 and this long lasting channel has been broken at April 2022, and upper line of the channel became support at July and August of 2022. So there are some signs that it's not a fake going out of channel like the one in 2020 March.
Does Howard Marks right by saying it's a "sea change" ?
And in this weekly chart of TVC:US10Y , we can see it has formed a new uptrend in a new channel:
(Maybe you can view the chart with /x/DHeM0t8W )
See how good it has used that upmoving support. Now, we are again hitting that support and if that support line is broken, it would be a "strong buy" for NASDAQ:TLT and AMEX:TMF .
Both graphs have given bullish divergence recently:
(Maybe you can view the charts with /x/2jGkJkCJ and /x/5NGqJ3Ze )
This week we will see if TVC:US10Y will break the channel and confirm the bullish divergence of TLT and TMF. If the support would been broken at TVC:US10Y , then 4.20 and 3.40 and 2.75 are the levels to watch for the bullish trend of NASDAQ:TLT and $AMEX:TMF.
In conclusion, if TVC:US10Y will break the channel this week, I'm long in NASDAQ:TLT and $AMEX:TMF.
If not, we will keep watching if Howard Marks was right and it's really a sea change.
US10Y ~ November TA Outlook (Weekly Chart)TVC:US10Y chart mapping/analysis.
US10Y getting dumped off combination FOMC decision, US economic data + US Treasuries update triggering institutional short covering.
Bond & equities market squeezed higher, in-line with seasonality.
Possible bearish H&S in development on lower timeframe, pending pattern confirmation.
$US10Y Negative Divergence Played Out"The TVC:US10Y Negative Divergence Played Out as we observed a scenario where the momentum indicator, such as the Relative Strength Index (RSI), had been showing bearish divergence with the U.S. 10-year Treasury yield. This indicated a potential weakening of the yield's upward momentum, despite higher prices initially. Subsequently, the divergence 'played out' as the 10-year Treasury yield indeed reversed its upward trend, aligning with the bearish divergence signal. This divergence resolution may have led to a shift in market sentiment or investment strategies, impacting various sectors and asset classes."
The Bond Market is Pricing in a Collapse of The Yen Carry TradeThe spread between the US10Y and JP10Y has historically been a great leading indicator of contraction within the Yen Carry Trade and likely will be into the future.
If we were to apply TA to it, we can see that the spread appears to be Double Topping and has formed a Bearish Shark at this top as the RSI breaks down and the MACD Diverges. If we are to take this as a warning, then we should expect this spread to go down significantly, and that would be accompanied by the contraction of the Carry Trade, leading to lower liquidity and signfiicantly tighter credit conditions and ultimately a depreciation in market pricing.
I think we could see JPY and USD strength during this time but would avoid other currencies.
US 10Y yield has topped short-termThe Fed left its policy rate unchanged at 5.25%-5.5% and the US 10Y yield sold off on the back of a less hawkish Fed.
The daily chart reveals a small top completed between 4.80-5.02 and this implies a short-term target of 4.58.
We are viewing this as a correction lower, rather than the end of the longer-term broader upward trend at this stage.
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Strongest Recession Signal EverThe yield curve has inverted to the most extreme degree ever, which is a warning that a recession is coming. In this video, I analyze the charts for the AMEX:SPY S&P 500, NASDAQ:NVDA Nvidia, NASDAQ:AAPL Apple, and the yield curve on U.S. Treasurys to see what they're telling us about future price action.
In the video, I mention that the bull rally following the Great Recession was primarily due to the Fed's monetary easing. The chart below shows evidence of this. When the value of the assets added to the Fed's balance sheet is compared against the value of the S&P 500, the stock market appears to have essentially moved horizontally. This shows that the primary reason for the stock market's rally is the central bank's extreme expansion of its balance sheet.
If you enjoyed this post, I would greatly appreciate it if you leave a boost! If you have any questions or would like to share your thoughts, feel free to leave them in the comments below.
Important Disclaimer
Nothing in this post should be considered financial advice. Trading and investing always involve risks and one should carefully review all such risks before making a trade or investment decision. Do not buy or sell any security based on anything in this post. Please consult with a financial advisor before making any financial decisions. This post is for educational purposes only.
US 10-year yield topped out?The US 10-year yield is showing signs of topping out after recently touching a 16-year high just above 5.00%. It’s still too early to confirm that long-term yields have topped out but given the entrenched inflation, risk-off sentiment and growing US government debt, US long-term yields will probably remain elevated until the Fed’s interest rate policy becomes clearer. Yields of 4.80% is the first level of support and a break below this level will allow yields to ease lower towards 4.50%.
There is also a degree of divergence on the RSI that I'm keeping my eye on.
US 10Y TREASURY: waiting FOMCThe US Treasury yields eased a bit during the previous week, as inflation data are showing further relaxation in inflation figures. The 10Y US benchmark tested 5.0% level at the start of the previous week, however, the week ended at level of 4.83%. The FOMC meeting is scheduled for November 1st, but current expectations are that the Fed will not further increase interest rates due to the latest posted inflation figures. However, Fed Chair Powell's statement after the meeting will be closely watched, which might bring some volatility back in Treasury yields.
The 10Y Treasury yields will start the week ahead by testing 4.8% level. At this point on charts, there is no indication that yields have opted to return to the levels of 5.0% and above, in which sense, some further relaxation to the downside is probable. In this case, 4.6% might be a probable target and a short stop on the road toward 4.4% in the weeks to come.