Retail sales surge higher than expected on October 17th, Industrial Production comes in higher than expected, and Atlanta Fed GDP Now for Q3 was revised higher from 5.1% to 5.3%. With the economy and the consumer remaining resilient, is the 10 year primed to break out to new 52 week highs? Rates will continue to be dependent on economic data, and further resilience to higher yields is likely to lead to higher yields.
What’s Next?
The 10 year yield has seen tremendous strength since breaking out above the 10/21/22 highs. We can see that as of late, the 10 year has traded within a parallel channel, which is roughly 35-40 basis points wide. Major resistance will be the previous highs on October 6th. This is defined in the chart as “Major Resistance.” If the 10 year can break and close above this level (4.88), the 10 year is likely to test the psychologically significant 5.00 handle.
Weaker than expected economic data or further escalating geopolitical conflict could provide a relief rally for treasuries, thus sending yields lower. As this 10 year yield contract is moving near a 45 degree angle, a faster moving average, like the 21 day EMA will provide for a better support level. Currently the 21 day EMA is at 4.61. A break and close below this level is likely to then test the parallel channel, where a break and close below the channel could neutralize this bullish trend.
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