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Italy’s 10-Year Bond Yield May Rise to 5.16%: Technical Analysis

Italy’s 10-year bond yields may rise to the highest level in four months after breaking above a key level of so-called resistance, Credit Suisse Group AG said, citing trading patterns.

The yield climbed above December’s high of 4.90 percent today, opening the way for an increase to 5.08 percent, the 38.2 percent retracement of its decline from July to January, technical analyst David Sneddon said, citing Fibonacci analysis.

“The big support level now for Italy is coming in around 5.08 percent,” London-based Sneddon said. The next resistance level is the 200-day moving average at 5.16 percent and a move above that “would start to open a door to a more worrying deterioration for Italian bonds,” he said.

Italian 10-year yield rose 27 basis points, or 0.27 percentage point, to 4.76 percent at 11:16 a.m. London time after climbing to 4.93 percent, the highest level since Nov. 20. The last time it reached 5.16 percent was Oct. 11.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break above resistance or below support indicates an asset may move to the next level.

Resistance refers to an area on a price graph where analysts anticipate sell orders to be clustered. Support is where there may be orders to buy.

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

To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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