Tuesday Interest Rates & the US Dollar
Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged. | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |
The four major durations of the yield curve are shown below. The 10-year looks like it wants to break out above important short-term resistance, but it hasn't yet and may pause for a bit. I believe the strength in 10Y rates points to an anticipation of US economic growth and is indicating that the 10Y and 30Y are not the place to be at the moment. However, if there is a sell off in the equity market, money could flow back into US Treasuries which would push rates back down, at least temporarily.
The chart below shows how the 10Y rates have consolidated since last summer, testing the lows around 4.5% several times. However, 10Y rates are currently still within the trading range. The 3M T-Bill has broken slightly below its trading range as money may have been moving from longer to shorter durations. The interest rate sensitive equity sector has rallied since mid March, but is lagging the market and stalled just above the prior high. If 10Y rates do break above the trading range, this equity group is likely to continue to underperform.
Below is a longer-term view of the 10Y rates being pushed higher by a 4-year uptrend, but now just below a resistance level.
Additional overhead resistance for 10Y rates is shown in the chart below. How the 10Y resolves the convergence of these trends in the coming weeks will tell us a lot about how to position our portfolios.
