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U.S. 10-Year Yield May Test 2%, CRT: Technical Analysis

Yields on 10- and 30-year Treasuries are poised to test six-month highs before the Nov. 6 election after failing to break below so-called upward-sloping channels, according to CRT Capital Group LLC.

“We’ve hit and tested the bottom of the channel a number of times on both securities and have failed to break lower, which suggests the momentum is leaning slightly more bearish,” said David Ader, head of U.S. government-bond strategy at CRT in Stamford, Connecticut. “The headlines of late have been more optimistic and the seasonal factors support the bearish momentum, which give a compelling reason why we may have a selloff.”

Thirty-year bond yields may rise as high as 3.2 percent if they breach 2.98 percent, with 10-year note yields poised to climb to 2 percent if they top the 200-day moving average of 1.81 percent, said Ader. The yields last touched those levels in April, before falling to all-time lows of 2.44 percent and 1.38 percent in July. Since then, they have risen in an ascending channel, suggesting a continuing uptrend in yield.

Treasuries fell today for a third day, the longest streak in almost six weeks, as U.S. new-home construction surged to the highest level in four years and after Spain kept its investment-grade debt rating from Moody’s Investors Service. The benchmark 10-year note yield climbed to as high as 1.82 percent, the loftiest level since Sept. 19. The 30-year bond yield touched 3 percent for the first time since that same date.

Ten-year notes have returned 3.7 percent this year, versus a 2.1 percent gain for 30-year bonds and a 1.9 percent advance in the broader Treasury market, according to Bank of America Merrill Lynch indexes.

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

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