Government bond yields
Eoin Treacy's view There has been a great deal of discussion about the possibility of a bond bubble
or otherwise in Fullermoney over the last few months. Today, I would like to
set aside the secular bull/bubble argument and concentrate on the yield charts
for a number of sovereigns which are presently at interesting levels.
US 10-year Treasury yields lost downward momentum from earlier this year and hit a medium-term low near 1.35% in July. The yield has since ranged in a relatively gradual reversion towards its mean and a sustained move below 1.53% would be required to question current scope for continued higher to lateral ranging. A move above 2%, held for more than a week or two, would be required to question the medium-term downtrend. The Canadian 10-year has a relatively similar pattern.
German 10-year Bund yields also hit a medium-term low in July and rallied to test the 200-day MA. It has since held a progression of lower rally highs and a sustained move above 1.47% will be required to check potential for additional lower to lateral ranging.
UK Gilt yields also hit a medium-term low from July and have been ranging mostly below the 200-day MA since September. A sustained move above 2% would break the progression of lower rally highs and signal a return to more than temporary supply dominance.
The Japanese 10-year yield posted a new low earlier this month and appears to be in the process of rallying to unwind its overextension relative to the 200-day MA. However, a sustained move above 0.82% will be required to question the consistency of the medium-term downtrend.
Swiss 10-year yields completed an emphatic upside weekly key reversal on Friday. Additional follow through this week would challenge the 200-day MA. A sustained move above 0.66% would be required to break the progression of lower rally highs and the consistency of the 18-month downtrend.
Australian 10-year yields have held a progression of higher reaction lows since June and rallied last week to push above the 200-day MA for the first time since March. A clear downward dynamic would be required to check current scope for further upside.
From the above charts Australian and Swiss yields look most likely to move higher, UK yields, in the absence of a clear downward dynamic, also look likely to advance over the medium term.