Got Bonds? Protected By Treasuries as U.S. 10-Year Yield Trades Below 3.9%

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+ Bear Flag Structure Playing Out

Edit: During Friday's U.S trading session, the yield traded as low as 3.86%

Last week Friday we discussed the bear flag structure which implies the potential for downside continuation. Over the course of the week, the U.S 10-Year Bond Yield has traded from 4.25% to 3.97%. Lower bond yields mean that bond prices have risen. This move is a continuation of our view at the beginning of this year which recognized the overbought conditions in bond yields i.e. looking for a higher bond prices. Well done to clients who may have allocated a portfolio to treasuries and participated in being long bonds!

Chart below is 'current' (as of Friday 04 April at 06h50, South African Time)

The current price action model reading is as follows:

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Previous Post (Friday 28 March, 19h28, US Trading Session): Yield Down, Price Up. Well Done Bond Buyers

The move lower in bond yields is in line with our previous view (driven by the model/Tactical Trading Guide) that yields had become overbought (above 4.7%) in the short and medium term and that a risk of a bearish reversal was possible. At current levels we are seeing a potential bear flag technical formation support by poor candle structure on the yield.

US 10-Year Bond Yield Chart as of Friday 28 March (U.S. Trading Session)

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Previous Post: U.S. 10-YEAR BOND YIELD Bullish Momentum However, Approaching Short Term Overbought (08 January 2025)

Overall Summary

The image presents a price action analysis for the US 10-Year Bond Yield, focusing on three timeframes: Short Term (1-10 days), Medium Term (2-4 weeks), and Long Term (5-8 weeks).

Key Observations

7-Day Trend: High Bullish Momentum, Approaching Overbought

14-Day Trend: Very Bullish

Short Term (1-10 days): Price Action Reading: Very Strong Move, Buyers in Control, but Don't Chase - May Fail to Hold the Highs; If it doesn't hold, the 8-EMA may be a short-sell target.

Medium Term (2-4 weeks): Price Action Reading: Aggressive Buying but Do Not Chase - Look for Overshoot or Failure to Hold Prior Session Highs to Short-Sell Back to the 8-EMA.

Long Term (5-8 weeks): Price Action Reading: Attempting to Advance Whilst in a Bullish Regime - If it Pulls Back, Use Prior Session Close or 8-EMA as an Accumulation Zone.

Interpretation

Bullish Momentum: The price of the US 10-Year Bond Yield has been rising strongly in the short term.

Caution: The momentum is approaching overbought territory, suggesting a potential reversal.

Trading Strategy:

Short-term traders: Be cautious of chasing the price higher. Look for signs of weakness (like a failure to hold recent highs) to potentially short-sell.

Medium-term traders: Avoid chasing aggressive buying. Look for opportunities to short-sell if the price overshoots or fails to hold prior session highs.

Long-term traders: Maintain a bullish bias. If the price pulls back, consider accumulating (buying) near the prior session close or the 8-EMA support level.

Lester Davids

Analyst: Unum Capital