Market context

  • Global risk sentiment is cautious today, with concerns about recessionary risks and ongoing geopolitical tensions weighing on markets.
  • The US Federal Reserve is expected to remain on its hawkish path of raising interest rates to combat inflation, potentially putting further pressure on Treasury yields.

Technical analysis:

  • Current yield: 4.12% (as of 4:50 PM EST, January 21st)
  • Day range: 4.103 – 4.154%
  • 52-week range: 3.262 – 5.022%
  • Key technical indicators:
    • MACD (Moving Average Convergence Divergence): Bearish crossover, suggesting downward momentum may be building.
    • RSI (Relative Strength Index): Currently at 42, indicating near-neutral conditions.
    • Bollinger Bands: Price currently within the bands, suggesting moderate volatility.

Observations:

  • The 10Y yield remained relatively flat throughout the day after a slight uptick in the morning.
  • The 52-week range shows significant volatility in the yield over the past year, reflecting shifting market sentiment and economic data.
  • The bearish crossover on the MACD suggests potential for further decline in the near term, however, the neutral RSI and price action within the Bollinger Bands indicate uncertainty and limited conviction.

Potential scenarios:

  • Downside: If risk aversion persists and economic data continues to disappoint, the yield could break below the recent support level of 4.10% and test the 52-week low of 3.262%.
  • Upside: A positive surprise in economic data or any easing of geopolitical tensions could lead to a rally in the yield, pushing it back towards the 52-week high of 5.022%.

Overall:

The technical picture for the US 10Y Treasury yield is unclear, with downside and upside potential both on the table. Closely monitoring economic data releases, Fed communication, and global risk sentiment will be crucial for determining the near-term direction of the yield.

Note: This analysis was written on January 22, 2024, 10:00am EST. Market conditions may have changed since then.

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