Benchmark Treasury yield challenging its April 2024 high

BENCHMARK TREASURY YIELD CHALLENGING ITS APRIL 2024 HIGH

The U.S. 10-Year Treasury yield US10Y jumped on Tuesday after better-than-expected data pointed to a strong economy and as the Treasury auctioned $39 billion of the notes to average demand. The 10-year yield ended the day at 4.685%.

Now, on Wednesday, with its 4.73% intraday high, the yield is challenging its 4.739% April 2024 high:

In the wake of a lower-than-expected ADP national employment print, but fewer initial jobless claims than expected, the yield is now around 4.70%.

Initial yield support is at 4.641% followed by the 21-day moving average, which is now about 4.50%. This moving average is ascending around 2-3 basis points per trading day.

On a thrust above 4.739%, the next resistance is at 4.77% followed by the 4.88%-4.935% area. However, if the September 2024 low marked the end of a protracted correction, the yield should ultimately exceed its 5.021% October 2023 peak.

In the event that October 2023 peak is overwhelmed, a zone defined by a Fibonacci projection, at 5.1604%, and the 2007 high, at 5.333%, may offer potential for another reversal.

Meanwhile, on Wednesday, in premarket trade, the main U.S. equity index futures are slightly lower. Of note, since mid-September, and into the S&P 500 index's SPX early December high, stocks and the yield generally advanced together.

However, it's now been 20 trading days since the SPX last scored a record closing high on December 6. Over this period, the yield has jumped around 60 basis points:

Just looking back over the last three years or so, a rising 10-year yield has tended to precede, or coincide with, SPX instability. Thus, stock bulls may need to see the yield now turn down to help take pressure off the equity market.

(Terence Gabriel)

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