Moving Averages Signal U.S. Note Yield Rise: Technical Analysis

Treasury 10-year notes, off to the worst start in a decade, may fall further as the benchmark debt yield’s 50- and 100-day moving averages are close to trading above the security’s 200-day moving average.

The convergence of the measures of price momentum typically suggests upward pressure on yields, said Thomas di Galoma, a managing director at Navigate Advisors LLC, a brokerage for institutional investors in Stamford, Connecticut. The 50- and 100-day averages have risen to 1.719 percent and 1.711 percent as the 200-day average has fallen to 1.718 percent.

“The technical indicators suggest, over the short term, investors are cautious and more reluctant to extend out the curve -- suggesting we could see more selling,” di Galoma said. “The Fed is pumping a lot of liquidity in the system to pump up risk assets, and they are succeeding to some extent.’

The 10-year yield climbed five basis points, or 0.05 percentage point, to 1.86 percent at 12:01 p.m. in New York, according to Bloomberg Bond Trader prices. The yield dropped to 1.80 percent yesterday, the least since Jan. 2.

‘‘Even if the Fed is successful in pumping up risk assets, the economy isn’t going to come roaring back,” he said. “And with all the uncertainty coming from Washington, there is no reason to believe that we will stray too far from this range.”

Ten-year notes have lost 0.7 percent this year, more than double the 0.3 percent loss in the broader Treasury market, according to Bank of America Merrill Lynch Indexes. The last time the security started the year worse was 2003, when it lost 1.8 percent.

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: Cordell Eddings in New York at ceddings@bloomberg.net

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

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