Macro Extremes Alert – U.S. 10’s

U.S. 10 year bond yield are at ‘overbought extremes’.

At 2.41%, it’s kinda done or at the least, at the upper end of being so.

I’ll give a move to 2.6% (that downward sloping resistance line in the chart below) but I’ll say that you don’t want to be shorting bonds at these levels.

Beyond the subjective notion that short bonds is a crowded trade and the chart below showing a unison registration of a 70 RSI reading (it’s 12th visit in 30 years) with a 2.5 weekly standard deviation above the mean, my other work tells me that the 10’s are the most stretched since October 2018.

In fact, other than 2018 and now, we haven’t seen the 10’s this ‘stretched’ at any other time in 40 years of data.

Additionally, the U.S. 10 year bond yields have doubled in 8 months and quadrupled in 18 months.

If you think 2.4% is low compared to where we once came from, the quantum of this ‘recent’ move should count for something.

p.s. once again, tune in to the noise amongst the market pundits, chat rooms and the media again. ‘Today’s’ hyper-ventilation is now about falling bond market yields.

Similar to recent moments seen in Nickel, Oil, Crypto, Wheat, Chinese equities etc etc, consider the opposite side of what the crowd is crowing about.

It’s funny, I just can’t seem to remember ‘them’ saying anything when interest rates were 1%……

March 23, 2022

by Rob Zdravevski

rob@karriasset.com.au

#pendulum