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U.S. 2-10 Yield Spread to Narrow, RBS Says: Technical Analysis

The extra yield Treasury investors require to own 10-year notes compared with two-year securities may extend its decreases amid turmoil in Europe and slower growth in China, according to Royal Bank of Scotland Group Plc, citing technical analysis.

Slow stochastics, an indicator of momentum, show the difference between two- and 10-year note yields is poised to narrow after the directional indicator breached a level that indicates sentiment is extreme, said John Briggs, an interest-rate strategist in Stamford, Connecticut, at RBS Securities Inc. Investors can take advantage of this trend by selling the two-year note and buying the 10-year security, he said.