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Treasuries Break May Signal Higher Yields: Technical Analysis

The breach of 200-day moving averages of Treasury 10-year note and 30-year bond yields for the first time since July may signal further declines in government-debt prices, according Oscar Gruss & Son Inc.

Yields (USGG10YR) on benchmark 10-year notes rose as high as 2.2454 percent in New York, exceeding today’s 200-day moving average of 2.2117 percent. Thirty-year yields reached 3.370 percent, topping the 200-day average of 3.3625 percent.

“There are finally some signs of life in the long end of the Treasury yield curve,” wrote Michael Shaoul, chief executive officer of New York-based Oscar Gruss, in a note to clients before the levels were crossed. “Our view remains that the long end of the curve is at least 100 basis points lower than it should be given the balance of economic news.”

Yields rose to the highest level in more than four months, a day after the Federal Reserve raised its assessment of the U.S. economy and reduced demand for the relative safety of government debt.

Comments in a statement following the conclusion yesterday of the Federal Open Market Committee induced traders to cut the probability that the central bank will embark on a third round of so-called quantitative easing. Fed policy makers raised their assessment of the economy saying “the unemployment rate has declined notably in recent months but remains elevated.”

Yield resistance is an area on charts where buy orders may be clustered, making further yield increases more difficult. Note and bond prices move in opposite direction of yield changes.

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

To contact the reporter on this story: Liz Capo McCormick in New York at Emccormick7@bloomberg.net

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

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