After months of choppy trading in treasuries, a good deal of technical damage was done yesterday. The only good takeaway was that the high yields for the day were made in the first 15 minutes, and that really was good since stocks continued to fall until the SPX closed 145 points lower, and gold continued to rise until it was $175 higher and it's up another $100+ this morning.
For the second day, the 5-year yield closed above the upper end of the channel, which had contained it since September, and while it was only the first close outside of the channel the 10-year yield had been in since November, that chart looks even more ominous since it left a gap over the upper channel line. And not to beat the channels to death, but only two days after the 30-year yield broke slightly below the lower end of its channel, it is already within 6 bps of the upper channel line.
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Yields are now above all five of the moving averages that I track, and only the longest of them, the 144-day, is not moving higher on the 5- and 10-year charts, although it has been going sideways for several days.
If all that bad news wasn't enough, yesterday was the first time the 5-year yield penetrated a trendline drawn from its April yield crest and it closed above it, while the 10-year yield poked its head above a trendline drawn from its January 2025 yield crest and then closed right on the line.
I had a tooth pulled yesterday and I imagine I still had a better day those who were very long stocks and/or bonds. Treasuries have been so choppy for the past year that as bad as yesterday looked, would I dare rule out a recovery?
Never say never, but I think yields need to move higher before any sort of real recovery is very likely. The moves yesterday were prompted by geopolitical events and while prior to yesterday one could point to clues supporting breakouts in either direction, to me there had been a trail of bearish looking cookie crumbs developing, which seemed to be getting easier to follow by the day.
The 5-year yield reached 3.872 yesterday, barely through what looked like strong support, and if gets there again I think we'll see it at least 3.99, while I could easily see the 10-year yield reach 4.50, and if the 30-year yield can't hold this side of 5%, then that multi-year double yield crest of 5.15 will be in everyone's crosshairs. And if the moves up in yield which began which began in September of 2024 are still developing B-waves of ABC corrections from October of 2023, still a distinct possibility in my mind, then those targets will probably all be exceeded.
Treasuries are trading mixed this morning, still with the curve steepening. Tomorrow we'll get reports on the Core PCE Price Index, Final GDP, Personal Income and Personal Spending, and Jobless Claims, but only the Claims report is current, the others are delayed by at least a month and not likely to have the impact they otherwise might. The next rate cut currently priced in by futures will be in June, coincidentally or not, at the first meeting after Chairman Powell's term ends.
