If you read Jim Cramer's update on the U.S. Treasury market and the yield curve you have a good introduction to the world of rates or the cost of capital. I admit that not everyone is able to wade through A History of Interest Rates by Sidney Homer. Most of the Treasury traders I have run into over the years give little credit to technical analysis. You might have needed it to succeed in the Chicago pits but for upstairs traders in New York it doesn't get presented to clients with advanced degrees. Leave the charts in your desk. Despite the prejudice, let's see what the two-year U.S. Treasury Yield chart and the 10-year U.S. Treasury Yield chart look like and where they may be going.
In this daily bar of the two-year yield, below, we can see that yields are testing the rising 50-day simple moving average line. The 200-day line is well below the market. The 12-day price momentum study dose not show a bearish divergence so we don't have a leading indicator suggesting that rates could decline. The Moving Average Convergence Divergence (MACD) oscillator has been weakening for months but it is still above the zero line.
In this weekly chart of the two-year yield we can see that yields are above the rising 40-week moving average line. Momentum has been slowing all year but I do not see a bearish divergence. The weekly MACD oscillator crossed to a take profits signal in May and is still well above the zero line.
In this Point and Figure chart of the two-year yield, below, we can see an upside yield target of 2.90%. You might say "oh no" but this is just part of the story.
In this daily bar chart of the 10-year yield, below, we see a weakening picture and maybe even a small head and shoulders pattern. Prices are below the declining 50-day simple moving average line and not that far above the rising 200-day line. Price momentum has been weakening from late April and tells us that the rise in rates has been slowing.
In this weekly bar chart of the 10-year yield, below, we can see that yields are above the rising 40-week moving average line. The weekly MACD oscillator is in a bearish mode buy still above the zero line.
In this Point and Figure chart of the 10-year yield, below, we can see a possible downside yield target of 2.49% or let's call it 2.50% among friends.
Bottom line: You just read that the two-year could go to a 2.90% and the ten-year to a 2.50% which would mean the curve could invert! Don't panic just yet as Point and Figure charts ignore time and like everything else in technical analysis the best we can do is be a wind-sock and not a crystal ball. With big unknowns like tariffs and oil prices and what they could mean for global growth who knows?