Risk Tells in the Currency and Bond Markets Pointing to Further Short-Term Downside
Expect a downtrend from now until October and then a rally into the end of the year.
The 10-Year Treasury Note Yield didn't get to test resistance (yet) before the current down move began.
I was calling for a move up to at least the 1.978% level on the 10-year US Treasury Note yield before I saw another down move beginning. As we all know, it's tough sometimes to get the markets to do just as you predict. There still may be a little upside move in yields heading into the end of the month/quarter. However, at this point, nothing is a certainty. The macro picture in yields still tells me that the low yields from July will be tested – it's just a question of whether that happens during this move or after one more shot to the upside.
The implication of lower yields – assuming recent relationships hold up – is that risk assets should remain under pressure. So, my call was for a rally in risk into month's end (corresponding with higher yields), which would then be followed by the "risk off" trade taking back over in October (corresponding with yields falling to test the July lows). It's the first part of that prediction that is in question. The second half of the prediction seems to me to be almost a certainty at this point.
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