Treasuries Rally Poised for Imminent Reversal, Indicators Show

  • Technical gauges suggest higher yields short-term, then lower
  • Two key relative strength indexes rarely where they are now

The rally in Treasuries has pushed key technical indicators to extreme levels that have repeatedly preceded reversals in the past year.

The 10-year yield’s relative strength index, a momentum gauge, fell below 30 into oversold territory this week for the first time since January 2015. The futures market, meanwhile, has pushed prices even further into the overbought range. In the past 15 years, the two indicators have been simultaneously at those levels just 2 percent of the time.

Each time the measures approached such levels in the past year in either direction, yields reversed course.

That said, the longer-term trend for yields remains downward, with consistently lower lows and lower highs since the start of the year. This suggests that the momentum shown by the two RSI readings hasn’t run out of steam.

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