US Treasury Yields Seen Climbing Higher
US T-Bond yield has broken above a multiyear base, which should lead to significantly higher yields for financial markets.
“As I have been saying, two consecutive closes above 3.25% on the benchmark 30-year T-B means that my statement in July 2016 that we were seeing the low – I said italicized, underlined and in boldface – is now, looking at the charts, thoroughly corroborated,” Jeffery Gundlach said.
The $15-T Treasury market tanked last Wednesday with the 10-year and 30-year yields racing to 7-year and 4-year highs, respectively.
Traders again sold US government debt Thursday following upbeat economic data and hawkish remarks from Fed officials, and yields – which move inversely to prices – hit new multi-year highs.
Last Thursday, the 30-year T-Bond ote closed at 3.35%, compared with 3.34% Wednesday.
“The last man standing was the 30-year, and it has definitively broken above a multiyear base that should over time carry us to significantly higher yields,” Mr. Gundlach said. “Also, the curve is steepening a little in this breakout, which is another sign that the situation has changed.”
Mr. Gundlach, who manages $123-B, said the stock market in the United States “has started to take notice, and will continue to, particularly if the speed at which rates rise becomes alarming.”
He noted that stocks outside the United States are already down significantly from the 26 January 2018 highs, “which will go down in history as the peak for the global stock market for this cycle.”
Some Key marks that investors are now focused on are around 3.50% for the 30-year and 3.25% for the benchmark 10-year.
Technical signals suggest bond yields may rise further, especially on the longer-dated debt, and at least stall the likelihood the yield curve would invert as the Fed will likely push short-term rates higher.
Some of the Bearish indicators included a surge in open positions in Treasuries and interest rates future and in bond market volatility, which spiked to its highest mark since June Thursday.
Wednesday’s breakouts now have analysts rushing to historical charts to indicate likely upside yield objectives.
Treasury yields blew past Key technical levels in the initial phase of the selloff, begetting more selling that drove the 10-year yield to a 7-year high.
Participants are hesitant in calling the end of the Bull market in bonds, because whenever yields hit Key technical levels opportunistic buyers drive in.
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