US 10-year yields are testing a long-term descending channel top, according to George Davis, Chief FIC Technical Analyst at RBC Capital Markets.
Looking at a monthly chart of US 10-year yields, Davis notes that yields are testing the long-term (31-year) descending channel top at 2.67%. This comes after forming a double bottom between 2012 and 2014 at 1.38%, suggesting a breakout from the channel may be more likely this time around (see Monthly Chart).
Davis thinks the 2.64 to 2.65% area will be critical going forward, this being the level at which a triple top dating back to 2014 exists and which is also flush with the 76.4% retracement of the 2014 to 2016 rally (see Daily Chart). As such, he thinks the 2.64/65 is the only serious obstacle to reaching the 2014 high, and his long-term target, at 3.05%. In the mean time, Davis’ one to three month target is 2.60%, which is the measured target from the December symmetrical triangle.