More Upside Coming in Bond Yields?
A month ago, we cited the downward-sloping channel in bond yields. Now it could be time for a move in the opposite direction, to the upside.
This weekly chart shows how 10-year Treasury yields held 1.44 percent in the week begun June 14. That was almost identical to the low in early September 2019. Yields bottomed 10-15 basis points lower July 2012 and July 2016, which suggests this price area has long-term significance.
Next, stochastics are rising from an oversold condition on the weekly chart.
There’s also an inverted hammer (potential upside reversal pattern) on that same candle three weeks ago.
In addition, the
iShares 20+ Year Treasury Bond ETF has a bearish kicker pattern on its daily chart on June 18 and 21. TLT isn’t exactly the inverse of TNX because it holds longer-dated Treasuries. However, it’s a useful (and heavily traded) ETF tracking the price action in the fixed-income market:
Crude oil could be another important chart because it just had its highest weekly close in 2-1/2 years. Higher oil prices generally drag yields upward as well.
Taking a step back, we could be at a pivotal time for bonds because GDP growth remains close to 10 percent and inflation is near long-term highs. Tight inventories across the economy could result in more upward price pressures. There are other incremental upside risks, like the economic reopening, increased hiring and government stimulus. All those forces together could maintain an upward pressure on yields.
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This weekly chart shows how 10-year Treasury yields held 1.44 percent in the week begun June 14. That was almost identical to the low in early September 2019. Yields bottomed 10-15 basis points lower July 2012 and July 2016, which suggests this price area has long-term significance.
Next, stochastics are rising from an oversold condition on the weekly chart.
There’s also an inverted hammer (potential upside reversal pattern) on that same candle three weeks ago.
In addition, the
iShares 20+ Year Treasury Bond ETF has a bearish kicker pattern on its daily chart on June 18 and 21. TLT isn’t exactly the inverse of TNX because it holds longer-dated Treasuries. However, it’s a useful (and heavily traded) ETF tracking the price action in the fixed-income market:Crude oil could be another important chart because it just had its highest weekly close in 2-1/2 years. Higher oil prices generally drag yields upward as well.
Taking a step back, we could be at a pivotal time for bonds because GDP growth remains close to 10 percent and inflation is near long-term highs. Tight inventories across the economy could result in more upward price pressures. There are other incremental upside risks, like the economic reopening, increased hiring and government stimulus. All those forces together could maintain an upward pressure on yields.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
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