US 10 year yield forecast. Heading to 0?
This is an update to previous ideas charted at New Years 2019.
The 10 year yield has been following the path of lower yields in a lock step fashion, however the pace of declining yields is concerning. The 3 day looks like Niagara Falls
Where do we go from here?
Currently, the 10 yr yield is in the middle of the 1 (1.32%) and .786 (1.734%) retrenchment lines with a biased towards heading to 1.32.
Two possibilities.
1) Yield punches right through 1.32% and set set new lows.
2) More likely in my view:
"China/Trade" news comes along just in time to see yields reach or even briefly penetrate 1.32%, forming a triple bottom reversal, before reversing and heading back up towards 1.73%
From here, yields could see a rejection from 1.32% and begin heading back towards 1.734%.
RSI is oversold, also suggesting a reversal could come soon.
However, said reversal will be fleeting.
Sometime by or before reaching 1.734% I would expect yields to run out of steam and resume their decline before testing 1.32% and ultimately breaking lower.
There is no such this as a quadruple bottom/top so in this scenario, the yield will crash below 1.32% and 0% becomes a very real possibility in the next 12 months.
How does this tie into mortgage rates? The 10 year is a good general barometer for interest rates but Mortgage Backed Securities (MBS), while improving (rates dropping) the rate of improvement has been slower than what we would expect given the halving of treasury yield in just 9 short months.
The 10 year yield has been following the path of lower yields in a lock step fashion, however the pace of declining yields is concerning. The 3 day looks like Niagara Falls
Where do we go from here?
Currently, the 10 yr yield is in the middle of the 1 (1.32%) and .786 (1.734%) retrenchment lines with a biased towards heading to 1.32.
Two possibilities.
1) Yield punches right through 1.32% and set set new lows.
2) More likely in my view:
"China/Trade" news comes along just in time to see yields reach or even briefly penetrate 1.32%, forming a triple bottom reversal, before reversing and heading back up towards 1.73%
From here, yields could see a rejection from 1.32% and begin heading back towards 1.734%.
RSI is oversold, also suggesting a reversal could come soon.
However, said reversal will be fleeting.
Sometime by or before reaching 1.734% I would expect yields to run out of steam and resume their decline before testing 1.32% and ultimately breaking lower.
There is no such this as a quadruple bottom/top so in this scenario, the yield will crash below 1.32% and 0% becomes a very real possibility in the next 12 months.
How does this tie into mortgage rates? The 10 year is a good general barometer for interest rates but Mortgage Backed Securities (MBS), while improving (rates dropping) the rate of improvement has been slower than what we would expect given the halving of treasury yield in just 9 short months.
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