10-Year Treasury Note (TNX)

U.S. Treasury 10-Year Yields Testing Key Resistance

Posted in 10-Year Treasury Note (TNX) on January 8th, 2014 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

On the Eve of the New Year, the yield on the U.S. Treasury notes tested key trend line resistance at the 3.034% level (or the 30.34 level on TNX) but did not break above it. Overextended stochastic and RSI readings suggest that before higher yields are scored, a decline or a correction in interest rates to lower levels might soon unfold instead.

With Janet Yellen likely be confirmed as Chairwoman of the Federal Reserve System later today (January 6), it might be an apt time to retest key trend line resistance on 10-year treasury yields. But will interest rates extend to higher levels before Yellen takes the reins of the Federal Reserve System on February 1? No one really knows.

What is interesting is that the S&P 500 Index, the Dow Jones Industrial Average and the Dow Jones Transportation Index are all sitting just below their respective long-term resistance trend lines. Conversely, the Dow Jones Utility Index is sitting just above key trend line support. Each of these indices could ebb away from these critical levels until another time. But if they were to each to stage breakouts (or a breakdown in the case of utility stocks), a new phase of market psychology and trading activity could emerge.

If 10-year treasuries were to break solidly above 3.034%, a possible move up to key trend line resistance in the 3.46% area could then follow. In turn, that would likely strengthen the U.S. Dollar Index, but could narrow margins on corporate profits and dampen mortgage activity at the same time. If on the other hand, a series of reports showing additional signs of economic strength and improving employment conditions were to be unveiled before February 1, a move to higher yields could proceed.

Needless to say, both the bond and stock markets are now sitting at important levels that will likely have a impact on the next phase of economic growth and the employment picture going forward.



U.S. Treasury 10-Year Note Yields Aimed For A Test Of Key Resistance

Posted in 10-Year Treasury Note (TNX) on December 1st, 2013 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

The debate over whether or when the Fed will begin to taper the size of their security purchases is showing up on the weekly chart of the CBOE 10-Year U.S. Treasury Yield Index (TNX). Although stochastic studies are at a level that suggests the upward movement in 10-year yields may be limited, it does appear that TNX is aimed for a test of an important trend line at the 30 level, representing a 3.00% yield. The question is: Will yields rise above 3.00% over that short-to-intermediate term?

On one side of the ledger is the appearance that the economy is improving and getting healthier, a condition that is often accompanied by rising interest rates. In this particular case however, a number of Fed officials have made it clear that short-term interest rates will nevertheless remain near zero for a prolonged period of time. If so, a steepening of the yield would result which, in turn, would strengthen bank stock prices since the spread between longer dated loans would rise versus their cost of funds at near zero percent.

On the hand, if 10-year yields were to rise above 3.00%, mortgage activity and home sales could retreat again, as they did back in May when Chairman Bernanke suggested the case for tapering then. Since the housing sector remains a major force in the domestic economy, a rise in 10-year treasury yields could crimp expectations for an accelerated economic expansion.

Other factors such as full-time jobs gains, weekly wage gains, industrial production, capital expenditures, healthcare costs and the inflation/deflation outcome are clearly part of the mix as well.

That being said, if U.S. Treasury 10-year yields were to break above 3.00% the next key level to focus on would be 3.47% where another trend line currently sits as resistance. A failure to break above 3.00%, let alone even testing it, could instead result in a retest of key support at 24 on TNX, representing a 2.40% yield on U.S. 10-year treasury notes. The key thing to remember is that the Fed appears anxious to begin the taper process, but the trigger to that initiative will remain data-driven.