The difference in behaviour between the ten- and thirty-year US Treasuries may alert us to a pivotal turn in US interest rates, says Peter Lee, Chief Technical Strategist at UBS in New York.
Lee notes that for the past few years the US 30-year Treasury Yield (TYX) had been diverging from the US 10-year Treasury Yield (TNX): While the TYX had been setting a series of lower-lows, the TNX had been setting a series of higher-lows (see Chart).
However, Lee points out that something unusual occurred during February of this year. TNX fell below its prior low of 1.64% setting a lower-low, while TYX established a higher-low pattern at 2.38% – higher than the previous low of 2.23% of January 2015. Lee says that if this trend continues it may alert us to a pivotal turn in US interest rates.
In the mean time, however, Lee thinks TNX is likely to head towards the range between 1.64 and 1.68% on the downside and 1.90 and 2.05% on the upside over the short-term. A similar trading range for TYX would be between 2.4% and 2.9 to 3.0%.
Read his March 2016 Technical Market Outlook in full.