10-Year T-Yield Hits Brick Wall At 1.75% – Breakout Retest At 1.63%

The 10-year T-yield is itching to move lower – at least near term – if nothing else just to unwind its overbought condition. This could have implications for tech shares and gold, among others.

The 10-year Treasury yield is beginning to give out signs of fatigue. These rates have had a massive rally, having bottomed at 0.4 percent in March last year. Momentum shifted into a higher gear after resistance at one percent fell early this year, followed by 1.2 percent mid-February, 1.4 percent toward the end of that month, and then 1.63 percent mid-March (Chart 1).

Shortly after that breakout, the 10-year tagged 1.75 percent a couple of times, before printing 1.77 percent on March 30, followed by a brush against 1.75 percent a couple more times. In essence, resistance at 1.75 percent has proven tough the past three weeks. Bond bears (on price) hope rates are just resting here. If so, a breakout at 1.75 percent would just about ensure a march toward two percent.

From this standpoint, the 10-year is essentially in no-man’s land currently. It closed Tuesday at 1.66 percent and a breakout retest at 1.63 percent probably lies ahead. A failed test opens the door to a test of 1.4 percent. The 50-day moving average, which is now sharply rising, lies around there at 1.42 percent.

This latest behavior on the long end of the treasury yield curve is taking place at a time when economic growth is picking up speed. At the March 16-17 FOMC meeting, the Fed raised its real GDP growth forecast to 6.5 percent this year, up from 4.2 percent last December; core PCE inflation forecast went from 1.8 percent to 2.2 percent.

In March, the economy added much better-than-expected 916,000 non-farm jobs, to 144.1 million. Since last April, 14 million new jobs have been created. Although, there are still 8.4 million fewer jobs from the pre-pandemic record high of 152.5 million reached in February last year.

Job openings, however, have exceeded that threshold, with February seeing 268,000 new openings, to 7.37 million, versus 7.15 million in January last year (Chart 2).

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