Treasury 30-bond yields dropped below their 200-day moving average, indicating this month’s slump in bond prices may be drawing to a close.
The yields dropped as low as 3.2958 percent in New York, less than today’s 200-day moving average of 3.3343 percent, according to prices compiled by Bloomberg. The yields had exceeded the average on March 14 for the first time since July, a signal among followers of technical analysis that prices would probably continue to decline.
“That the breaking the 200-day moving average didn’t propel us to sell off further is signaling a rejection of the rising yield trend,” said David Ader, head of U.S. government-bond strategy at CRT Capital Group LLC in Stamford, Connecticut. “The market has readjusted the range in the recent steep selloff and now the market is pausing to reinvestigate.”
Yields rose to 3.49 percent on March 19, the highest level since October. Treasuries have slumped since the Federal Reserve announced March 13 that policy makers raised their assessment of the U.S. economy, prompting traders to unwind bets for more monetary stimulus through the form of additional debt buying by the central bank.
“We saw the sharp selloff because there was a lot of long positions that had to be liquidated,” said Scott Sherman, an interest-rate strategist at Credit Suisse Group AG in New York, one of 21 primary dealers that trade directly with the Fed. “The market has found new levels that it is happy with, and will wait here until there is substantially stronger data or increased inflation risk. There is still too much uncertainty in the economy for much higher yields at this time.”
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 the 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.