After the market defeat, bond yields are even higher

(Reuters) – A bond market defeat that has driven yields to key levels has prompted some investors to prepare for another step that could finally end a three-decade uptrend.

The 15 trillion dollar (11.5 trillion pound) Treasury bill market exploded Wednesday with 10 and 30 year yields reaching seven and four year highs, respectively. Traders once again made a release of the US public debt on Thursday following optimistic economic data and hawkish remarks by Federal Reserve officials, and yields – which are moving in the opposite direction to prices – hit new lows. multi-year highs.

"The latest man was 30 years old and definitely exceeded a multi-year base that should lead us to significantly higher returns over time," said Jeffrey Gundlach, President and CEO of DoubleLine Capital, which manages $ 123 billion. dollars (94.46 billion pounds).

Some key levels on which investors are now focusing on laser are approximately 3.50% for the 30 years and 3.25% for the 10 years of reference. The 10-year and 30-year yields reached respectively 3.232% and 3.3920% Thursday.

Technical signals suggest that bond yields could continue to rise, particularly on longer-term debt, and that the yield curve could at least hold, as the Fed would likely increase rates in the near term.

Downside indicators included higher open Treasury positions, future interest rates and bond market volatility, which hit their highest level since Thursday in June.

"Wednesday's groups have now seen analysts rush to the historical charts to point to potential performance targets," said Karl Haeling, vice president of Landesbank Baden-Wurttemberg.

Treasury yields exceeded key technical levels in the initial phase of the sale, leading to higher sales that drove the 10-year yield to a seven-year high.

The market rout continued Thursday morning, before yielding on the decline of the Wall Street and before the monthly report of the government on jobs, to be released Friday at 8:30 (12:30 GMT).

Investors are reluctant to announce the end of the bull market for bonds, whenever returns reach technical levels of opportunistic buyers. Some analysts have estimated that the two-day liquidation was exaggerated and that it could reverse quickly if Friday's figures on employment, particularly on wages, were lower than forecasts.

Charts: US Treasury yields reach multi-year highs (reut.rs/2OA5ClY)

NEXT LEVELS

Gundlach set its sights on the 30-year yield, predicting that two close higher than 3.25% would be a bearish sign for the bond market. Thursday, the market closed above this level for a second day in a row.

The next traders of technical level seek a surface of 3.39 to 3.40% then of 3.50%.

Traders are also focusing on the 10-year benchmark, with psychological support of 3.25%, the highest level of most analysts' forecasts for 2018.

They will also check whether the 10 and 30 year returns should test 3.125% and 3.25% before the end of the week.

The US bond market will be closed Monday for the US Columbus holiday.

Chart: US Treasury gives extra help (reut.rs/2OvIZiH)

STEEPER YIELD CURVE

While concern over the imminent reversal of the yield curve erases, traders are considering the portion of the curve over 2 to 10 years with a resistance level greater than 33 basis points. They point out that after that, there is no longer any significant technical support before about 50 basis points.

In August, the yield curve reached its flatter level in more than a decade, fueling concerns it will reverse.

Such a movement is a reliable indicator of the recession of the economy since the last century. In the United States, the last three declines were preceded by periods in which the yield curve reversed 12 to 18 months earlier.

Chart: US yield curve (tmsnrt.rs/2zUqXiW)

BEARISH ALREADY

Analysts will follow data from the Commodity Futures Trading Commission, published every Friday, on investors' positioning on futures and futures before Wednesday's sell.

In the 10-year T-Bond sector, speculators, including hedge funds, have already accumulated a record level of foreclosures as of September 25th. On the other hand, fund managers have created a record number of positions that 10-year Treasuries will appreciate.

Chart: Commitments of traders (tmsnrt.rs/2FaJhTk)