News that Danish pension funds are exiting the US Treasury markets produced dramatic curve steepening trades at the openings this morning.
The 5-year yield began the day 1½ bps higher, the 10-year yield 4½ bps higher, and the 30-year yield 7½ bps higher. Additionally, S&P futures are down more than 100 points and gold futures are up more than $130.
Treasuries opened with bearish gaps on Friday and closed just 0.1 to 0.3 bps from their high yields for the day; the 5-year closed at its highest yield since August 22nd, the 10-year at its highest yield since September 3rd, and while the 30-year yield barely made it back into last Tuesday's range on Friday, this morning it opened at its highest yield since September 3rd.
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Friday saw the 5-year yield trade exactly a basis point through the upper end of the channel which it has been trading in since September, while the 10-year yield got to within 0.9 bps of its equivalent channel, and this happened just one day after the 30-year yield had traded 0.9 bps below the lower end of its channel. The difference being that the 30-year broke below its channel on Thursday but then closed back inside of it, while on Friday the 5-year broke and closed above its channel.
Thursday's brief intraday channel break by the 30-year yield now looks like a textbook example of technical head-fake. The channels weren't going to work forever, we knew that, but with things having looked more bearish than bullish based on the wave structure, with the moving averages looking troublesome, and now back-to-back bearish gaps and all this supported by increasing volume, I think this is a real concern.
On an unrelated note, I have a gold chart that I mentioned to my readers a week or so ago and that I still want to share, and the truth is that the longer I wait the more intriguing it becomes. With a quiet economic calendar most of this week, I figured that I'd find a day to post it, but now I'm not so sure. The treasury markets have been yawners for a while, but that may have just changed.
