U.S. 10-Year Yield May Reach 2.5%, CRT Says: Technical Analysis

Trading patterns indicate the yield on the Treasury 10-year note may rise to 2.5 percent if it stays above 2.36 percent as European leaders eke out a plan to solve the region’s debt crisis, according to CRT Capital Group LLC.

“As more details come out, if the details look more concrete, that may be enough to push it to 2.36 percent,” said David Ader, head of government bond strategy at Stamford, Connecticut-based CRT, in an interview. “It may be enough to take what’s already a bearish technical picture and make it a little more bearish.”

U.S. 10-year prices may fall and yields may rise as much as 25 basis points, or 0.25 percentage point, from yesterday’s level if a more comprehensive European plan to contain the crisis is detailed and if the U.S. economy continues to show strength, Ader said. The yield has traded at an average of 2.1 percent this month. It touched 1.71 percent on Oct. 4 and 2.37 percent today.

Any declines in yield could be limited by “a broken channel’s parameters at 2.03 percent resistance,” Ader wrote in a note to clients.

The U.S. economy accelerated in the third quarter at the fastest pace in a year. Gross domestic product, the value of all goods and services produced, rose at a 2.5 percent annual rate, matching the median forecast of economists surveyed by Bloomberg News and up from a 1.3 percent gain in the second quarter, Commerce Department data showed.

European leaders at their second crisis summit in four days persuaded bondholders to take a 50 percent loss on Greek securities and boosted Europe’s rescue fund to 1 trillion euros ($1.4 trillion).

“The devil is in the details,” Ader said. “I’m not strongly biased that rates are going to go up. When we see a modest pullback, it’s a buying opportunity. It will be very hard not to be tepidly bullish.”

In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.

To contact the reporter on this story: Susanne Walker in New York at swalker33@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net