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Financial Press
bond-report:-10-year-us.-treasury-yield-jumps-as-bond-rally-runs-out-of-steam-for-now
bond-report:-10-year-us.-treasury-yield-jumps-as-bond-rally-runs-out-of-steam-for-now

Breaking

Bond Report: 10-year U.S. Treasury yield jumps as bond rally runs out of steam for now

U.S. Treasury prices fell Wednesday, pushing the yield on the 10-year note further above the 1.20% level after touching a five-month low earlier this week.

What are yields doing?
  • The yield on the 10-year Treasury note BX:TMUBMUSD10Y was up 8.4 basis points at 1.287%. Yields and debt prices move in opposite directions.

  • The 2-year Treasury note yield
    TMUBMUSD02Y,
    0.209%

    edged up 1.2 basis point to 0.202%.

  • The yield on the 30-year Treasury bond
    TMUBMUSD30Y,
    1.944%

    rose 8.8 basis points to 1.952%.

What’s driving the market?

The Treasury rally has paused after the 10-year yield sank below 1.15% earlier this week, when worries over the delta variant of the coronavirus that causes COVID-19 sparked a flight to government bonds.

Equity markets bounced back sharply on Tuesday, with U.S. stocks posting further gains on Wednesday. Analysts said worries about the delta variant and its effect on the global economy may have been overdone, possibly having caused yields to overshoot to the downside.

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Treasury’s auction of $24 billion in 20-year bonds on Wednesday turned out to be a “bit soft,” according to Ben Jeffery of BMO Capital Markets.

Amid a broad-based rise in yields on Wednesday, stocks climbed, with the Dow Jones Industrial Average DJIA rising 247 points, or 0.7%. The S&P 500 SPX rose 0.7%.

What are analysts saying?

The rebound in the 10-year yield may have a bit more room to run by month’s end, according to BofA Global Research.

Monday’s bond rally — which pushed the yield below 1.18% — triggered a few “notable” signals suggesting “overbought” conditions and “a bounce to 1.35%, maybe 1.42%, by early August,” says strategist Paul Ciana. The break below all supports, including the 200-day moving average, “favors a downtrend in yield, not a correction’” since the yield’s peak in the second quarter.

“Now would be an impressive place for a stronger-than-expected reversal,” Ciana wrote in a note on Wednesday. That reversal, resulting in higher yields at the end of July and/or early August, would help form a distinctive pattern in the rate’s recent trajectory: It would look something like “the right shoulder of a head and shoulders” figure.

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