Thursday, December 19, 2013

UST2Y 2-Year Treasury Yield

The 2-year yield is showing signs of life off the bottom over the last couple days. The falling wedge, oversold conditions and positive divergence creates the low print and the springboard higher. Current print is 0.36. Stochastics already shot into overbot territory. Overall the chart may favor a sideways move through the brown channel at 0.3%-0.4%. The 10-year yield moves higher to 2.92% this morning, so the 2-10 spread is at 256, continuing to tease Keystone's magical 255 level for the 2-10 spread which is a line in the sand determining happy bankers versus sad bankers (due to the slope of the yield curve). This drama continues. Financials were up strongly yesterday, well over +2%, so traders definitely believe that the 2-10 spread will go to 260, 265, etc..., with the 10-year yield climbing to 3% and higher. The rationale for the move is that the economy is getting better.

Interestingly, as the 10-year yield moves higher, the 2-year may try to keep pace and prohibit the spread from increasing. Bigger picture, the thinking is that the euro and dollar currencies, as well as Treasury yields, will move sideways for the foreseeable future in a challenging economic environment. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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