Archive for December, 2012

U.S. Treasury 10-Year Yields Poised to Move Sharply Higher

Posted in 10-Year Treasury Note (TNX) on December 5th, 2012 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

With a steady stream of positive reports suggesting that the U.S.economy is improving; and with hopes that some sort of an agreement might be reached on Capitol Hill regarding the “fiscal cliff”, yields on U.S. Treasury 10-year notes (TNX) appear poised to move solidly higher.  A break above key downtrend resistance currently sitting a 1.74% level could trigger such a rise in 10-year yields along with a concurrent decline in 10-year note prices.

With monthly technical oscillators positioned for a rise in yields, it is also worth noting that if a break above 1.74% were to occur, a possible move up to a test of key resistance at 2.55% could result.

Such a move could be triggered by an agreement in Washington on fiscal policy where longer dated treasuries might be sold in favor of buying equities in that case. If a political agreement proves to be elusive however, another debt ceiling battle could erupt instead and push interest rates higher too, particularly if key credit ratings agencies begin to warn of possible new downgrades on U.S. debt.

Although a similar outcome on yields did not occur during the debt ceiling kerfuffle in 2011 (due largely to a “run to safety” maneuver instead), things might well be viewed differently this time around with criticism from countries like China are already beginning to surface.

Consequently, an agreement in Washington followed by the prospect of economic growth would obviously be preferred.