US: 10-year yields near important psychological level - BBH

Analysis General

Published: 2/19/2018 2:39:00 AM

Analysts at BBH explain that although nearly every economic release ahead of the weekend was stronger than expected (including import prices, housing starts and permits and University of Michigan Consumer Sentiment Survey), US 10-year yield slipped 3.5 bp.  

Key Quotes

“The yield had approached 3.0%, which is an important psychological level. Key support for the March 10-year note futures contract is 120-00.  It marks the 50% retracement objective of the rally from the 2007 low.  A break could spur a move toward 61.8% objective near 116-08.  Bullish divergences are evident in the daily MACD and RSI.”

“After dropping almost 5.2% in the previous week, the S&P 500 rallied 4.3% last week.  It was the best week since 2011.  It retraced a little more than 61.8% of the losses since the record high was set on January 26 near 2872.9.  The retracement objective (~2743) is a little below the 20-day moving average (2751). Although it pushed a bit through there, the close was a little below.  A convincing move above there would target the record high, which seems like what the technical indicators are suggesting.  However, this is also around where one would expect the bears, who think that the drop is the real move and that spike in volatility signals a new period, would make a stand.”

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