US 10 year Notes

Not every day that you get extremes in some data points so when you do, take notice. RSI near 15 is rare on US bonds/notes. The last time this was true on US 10 year notes was in 2016. This particularly relevant at the end of what looks like a 5 wave decline. In my previous update, I noted that this is wave V down but we have to wait for a confirmation. Now it's very oversold and yes we need that small confirmation but once we bottom we ended a decline that started in August 2020 and is wave 1/A of a larger bearish trend. A bounce back in wave 2/B is nearby. Usually, rising bond prices are associated with a crisis or a decline in equity prices. So that is the risk to this view. Unless the bounce I am thinking is temporary and only lasts for a month or two and then we see bonds decline again in extensions. In either case, we have a very oversold condition near term.

The second chart shows bond yields for the 10-year bond. We have reached the top end of the channel and any routine correction in bond yields can bring us back to the lower end of the channel again which is near 1.20-1.16 and rising. It depends on how we get there. The more time it takes the lower line will rise. In either case, a pause means that yields consolidate for a while. In short, the near-term panic on yields may now be overdone. If you did not panic on yields yet, it is too late to already.