UST2Y 2-Year Treasury Note Yield Weekly Chart; Drama Continues with Tight Bands and Yield About to Squeeze-Out Huge Move

The drama continues with the 2-year Treasury note yield weekly chart and the tight standard deviation bands turning into a tunnel of love highlighted with the previous chart. The standard deviation bands are squeezed-in tight (purple arrows) which means a huge move is going to occur. Tight bands, however, do not predict direction. This creates the drama playing out in real-time.

The 2-year yield is rallying for 5 weeks moving higher and higher so is the move out of the tight bands going to be an explosive move higher from here? The jury is out since the moves out of the tight band can fake you out sometimes juking when you thought they were going to jive.

Yield has tagged the upper band at 4.69% and also hit 4.71% which is a matching high to the November 4.72% (close enough for government work). Since the yield is at a matching high, the chart indicators can be assessed and the dark maroon lines show negative divergence clearly in play. Yield came up for the matching high but there is no juice in the tank for higher yields, in fact, the indicators hint at the yield topping out now or over the next week or two and then dropping.

This is a wild set-up along with the tight bands because it hints that this up move in yield is a fake-out and we may be on the cusp of a pivot down in yields that is going to slap everyone in the face.

The stochastics have juice but are overbot while the other indicators are more flattish. Again, the expectation would be for yields to top-out going forward and then dropping. Yield is also extended above the moving average ribbon (yield above the 20 above the 50 above the 100 above the 200) requiring a mean reversion lower.

If yield was breaking out higher now as per the tight bands, you would expect the bands to already begin flaring outwards but instead, the tunnel of love sideways remains tight.

Watch this chart closely since it is going to tell you a lot about the markets and economy going forward. It should tip its hand any day forward. It will be wild if yield begins collapsing to the downside. This scenario may occur if stocks sell off in force, people start to panic, and then some of that cash goes into the perceived safety of Treasuries driving up bond and note prices pushing the yields lower.

What do you think is going to happen? Everyone on Wall Street says no recession in sight and yields will go up and up and up. 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.

Note Added Thursday Morning, 2/23/23, at 8:38 AM EST: After the GDP number, the 2-year yield sits at 4.71%. A couple hours ago it was 4.68% and minutes after the data, yield popped to near 4.73% but now sits at 4.71%. The 2-10 spread is 76 bips. The drama continues. The tension mounts.