US 10-year yields face strong support at 1.30% - UOB

Quek Ser Leang at UOB Group’s Global Economics & Markets Research sees yields of the key US 10-year note facing strong support in the 1.30% level.

Key Quotes

“From a late January low of around 1.000%, US 10-year yield staged a strong and impulsive rally that sent it rocketing to a high of 1.776% in April. In view of the overbought conditions, the pullback from the high was not surprising. While the pullback is viewed as a correction, it has since gathered momentum and yesterday (06 July), it felled sharply by 7.9 bps, its largest 1-day drop since late February. Despite the sharp drop, there is chance for the yield to move back up towards the April’s high of 1.776% in the months ahead. However, a break of the key (and very strong) support near 1.300% (55-week exponential moving average, rising trend-line from last August as well as minor trend-line on the daily chart) would suggest that 1.776% could be a more significant top than is currently expected. To look at it another way, a break of 1.300% would indicate that 1.776% may not come back into the picture for the next 2 to 3 months, possibly longer.”

“In terms of the next several weeks, the 10-year yield is expected to trade under pressure unless it can move back above 1.510%. The next major resistance above 1.510% is at 1.630%. A break of 1.630% would greatly increase the odds for the yield to move back up to 1.776%.”