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U.S. Note Yields May Rise to Five-Month High: Technical Analysis

Treasury 10-year yields are poised to rise to the highest level in five months after breaching two levels of so-called resistance, Credit Suisse Group AG said, citing trading patterns.

The yield is set to extend its increase after breaking above the 1.75 percent level last week, which marks the high reached earlier this month, and closing above the 200-day moving average at 1.80 percent yesterday, said David Sneddon, a technical analyst at Credit Suisse Group AG in London.

“The U.S. 10-year managed to hold above the 1.75 percent breakout point,” Sneddon said in a telephone interview. “This leaves us still bearish,” he said, referring to a view that prices will fall and yields will keep rising.

The 10-year Treasury yield dropped four basis points, or 0.04 percentage point, to 1.77 percent at 8:14 a.m. in New York. It rose to 1.83 percent on Oct. 18, the highest since Sept. 18.

An increase above last week’s high would open the way for the yield to rise to 1.90 percent, Sneddon said. That would take it past the 1.89 percent level, which marks the 50 percent retracement of its decline from this year’s high of 2.40 percent on March 20 to the 2012 low of 1.38 percent on July 25, he said. The yield was last at 1.90 percent on May 10.

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 indicates that a yield may move to the next level.

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

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