Predicting the next move: US 10-year treasury bond yield after a 12% price surge

US 10-year Treasury bond prices have risen by 12% since December 9, 2024, it suggests a significant movement in the bond market.

The rise in bond prices indicates that the yields on these bonds have fallen, which typically happens when demand for U.S. government debt increases. Several factors can contribute to such a price move, such as:

Falling interest rates: If the Federal Reserve has been cutting rates or signaling future rate cuts, bond prices could rise as investors seek higher yields from existing bonds compared to new bonds with lower rates.

Economic uncertainty: Investors might flock to U.S. Treasuries as a safe-haven investment, especially if there are concerns about economic slowdown, geopolitical risks, or other uncertainties.

Inflation expectations: If inflation expectations have fallen, bond prices can rise because inflation erodes the purchasing power of fixed-income payments, making bonds more attractive when inflation is low.

Profit booking expected

Given that bond prices have risen significantly in a short period, profit booking (selling to lock in gains) is a reasonable expectation at this stage for several reasons:

Market correction: After a large upward movement in prices, it is common for some investors to sell their holdings, expecting a price correction. This would bring prices down a bit, potentially leading to a more stable price range.

Yield curve dynamics: The current price rally could lead to an overbought condition, where the yield on the 10-year bond is too low relative to the broader economic outlook. If interest rates rise again, bond prices would fall, leading investors to sell now before that happens.

Risk appetite rebalancing: As risk sentiment in the market changes (for instance, if economic indicators improve), investors may shift away from safe-haven assets like Treasuries, leading to a sell-off.

What might happen next in US 10Y bond yield

Price consolidation: There could be a temporary pause or small pullback in bond prices if profit booking takes place, especially if investors feel the 12% rise is unsustainable in the short term.

Interest rate influence: Any signals from the Federal Reserve regarding interest rate policy or economic conditions could drive further price movements. If the Fed signals that rate cuts are nearing their end, or if inflation concerns rise, bond prices might fall.

Investor sentiment: If the broader economic outlook improves, investors may begin shifting to higher-risk, higher-return assets, reducing demand for U.S. Treasuries.

US 10 Year Bond Yields prices reached a high of $4.628 range during today’s morning US sessions. This level could be a good opportunity to sell US 10 Year Bond Yield (Profit Booking start today onwards).

Given the current market conditions, today’s morning prices of $4.628 range could be a good entry point for selling US 10 Year Bond Yields.

If the prices downside, it may test today’s low $4.579 range. Below this support level, it could move downside towards yesterday’s low of $4.518 range. A further decline could take a fresh selling opportunities and prices reached $4.361 range, Last week’s low.

Holding period – Maximum 2-weeks (About 5% profit booking is expected)

In summary while the 12% rise in U.S. 10-year bond prices could indicate strong demand or market conditions favoring safe assets, profit-taking and market corrections are typical after such significant price changes. This could lead to a short-term stabilization or price pullback, depending on economic developments and investor sentiment.