A Damaging Week for U.S. Treasury Yield!
|What a weird and unsettling week. The equity indices for the most preserved their gains, albeit despite Thursday's divergent action, while the bond market went straight up (YIELD straight down), which is the more curious of the major asset class behavior as we head into the weekend...
Technically, the plunge in yield fom 2.46% on Tuesday to 2.30% on Friday (-6.5%) has broken the integrity of the Dec-Feb high-level coil/digestion pattern. It is threatening to morph all of the action since Dec 15 (2.64%) into an intermediate-term top formation that will project weaker yield into the area of the up-sloping 200 day eMA, now at 2.10%
Many on Wall Street are "blaming" the reversal in yield on a European flight to safety into US Treasury paper ahead of the French election on May 7th -- just in case a right-of-center candidate prevails, similar to the Trump-type "upset".
If there is some truth to placing "blame" on European buying, then it has overwhelmed an otherwise expansionist, pro-growth Trump agenda.
Frankly, my sense is that the fixed income markets are increasingly worried about the Border Tax, Trade Wars, AND the French Election, which certainly appears to be overwhelming the Trump growth agenda and a more hawkish Fed -- for now.
As for the implications for traders about the action in 10-year Yield, could it be that the bond market is sniffing a trade war and the Fed will have to "return" to its QE ways? Wow! If that is the case, or even a budding perception, then the precious metals and miners, painful though they are much of the time, remain a necessary part of our portfolios.
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