It was a tale of two halves in the bond market last week. The first saw peculiarly strong bids in Treasuries, which led to a big drop in USD/JPY and a decent rally in the likes of gold. The second was a reversal of that after the Friday jobs data, in which bonds were sold off heavily in the aftermath. That led to 10-year Treasury yields rising back above the 4% mark:
US Treasury 10-year yields (%) daily chart
Interestingly, there are no easy answers for what is driving flows in bonds at the moment. Was it month-end and a slight double top pattern near 4.20% for yields? On the latter, is last Friday’s bounce more prominent as it held near 3.80% – similar to December?
Or perhaps, there are other factors in play to consider as well: Dark days are coming for US commercial real estate and the banks holding the loans
Whatever the case is, it certainly is shaping up to be one that will continue to have an impact on broader markets. Currently, we’re seeing 10-year yields move back to its 200-day moving average (green line) at 4.097%. That will be the first technical hurdle to take notice of in trading this week.
If yields do push higher, then the double top near 4.20% will come into play. Alternatively, if yields do push lower, then the double bottom near 3.80% will be the one under scrutiny. Those will be the key lines in the sand to watch out for in trading this week.
In turn, it will also play a role in impacting dollar sentiment over the course of the week. In particular, any significant moves in this space will spill over to USD/JPY and gold especially.