A technical review of some western government bond yields
Comment of the Day

June 29 2011

Commentary by David Fuller

A technical review of some western government bond yields

David Fuller's view Some persistent downward trends have been broken this week, and none more consistent than US 2-YR Treasury yields (weekly & daily) which had fallen for eleven consecutive weeks to test their November 2010 low. The upward dynamics on Monday and Tuesday have reaffirmed that support. If approximately half of the current rally's gains are held during the next reaction and consolidation, which would not surprise me, then we can expect to see additional sideways to higher ranging over the next few months.

US 10-Yr rates (weekly & daily) are forming an upside weekly key reversal and the steep downward trend since April has been broken. US 30-Yr rates (weekly & daily) have also broken their persistent downtrends since the April rally highs. In both instances, closes beneath the recent lows would have to occur to offset current scope for sideways to higher ranging, eventually leading to a test of the upward boundaries since 2009.

Significantly, similar evidence of trend reversals can be seen with Canadian 10-Yr yields (weekly & daily). In a less dramatic development, Euro 10-Yr bonds (weekly & daily) have seen their biggest rally since the April peak over the last three days and further gains through Friday would produce a weekly key reversal. UK 10-Yr yields (weekly & daily) currently show an upside weekly key reversal following eleven consecutive weeks to the downside. This high degree of commonality provides compelling evidence that trend reversals are occurring and closes beneath recent lows would be required to question this outlook.

Please note - The US charts were prepared before the close.

I will review the corresponding futures contracts tomorrow but traders may wish to have a look because they are inevitably equally compelling.

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