How far will yields overshoot?

The yield on benchmark 10-Year Treasuries is now registering an overshoot condition after closing more than 20% below its 200-day moving average for the first time since August 2012, according to Michael Sacchitello at Stone McCarthy Research Associates.

However, Sacchitello points out that overshoot conditions can persist for longer than anticipated. So while the US 10-Year yield did finish higher for the first time since Christmas Eve last Wednesday, his analysis finds that the odds that yields can continue to fall before a cycle low is formed remains strong. In terms of just the short-term trend, the threat of the 10-year yield making lower lows will not abate until a sell-off above 2.162%.

See report.