UST2Y 2-Year Treasury Note Yield Weekly Chart; Negative Divergence

Remember the tight bands (pink arrows) on the 2-year yield chart? Tight bands tell you a big move is coming but they do not predict direction. Keystone was skeptical a couple weeks ago that up would be the resolution due to the negative divergence in play (red lines).

But alas, the Federal Reserve, led by Pope Powell, proclaims that the sky is the limit for rates going forward so the 2-year yield explodes higher out of the tight bands running up the top standard deviation band and now piercing above. Powell is pumping yields higher. The 2-year yield explodes higher to 5.05% testing 2006 highs.

Now that the bottleneck is clear, the chart remains in neggie d. The upper band is violated so a move back to the middle band at 4.44% is on the table going forward as well as the lower band at 3.96%. You may think that sounds ridiculous but it is not. If the stock market collapses, traders will be buying notes and bonds for perceived safety so price up means yields down.

Get to the point buddy, what's all this mumbo-jumbo mean? The 2-year yield should top out over the next week or two, in this area, perhaps 5.05%-5.17%, and then a multi-week downtrend in yields begins with 4.44% likely and 4.00% on the table. This will likely occur in concert with stocks collapsing. 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 10:30 AM EST: The 2-year yield drops to 4.98% back below 5%. If you bring up the daily chart, the MACD has some more gas although the chart in general is topping-out like the weekly chart above, so the top in yields is likely occurring over the coming days.

Note Added Friday Morning, 3/10/23, at 7:14 AM EST: The US stock market collapses. The 2-year yield received the negative divergence spankdown in quick order losing 20 bips in a flash an unbelievable move. The 2-year yield is at 4.82%. The 10-year is at 3.85%. The 2-10 spread is at -97 bips becoming less inverted after the -110 basis point drop. A new hook pattern forms and heads higher for the 2-10 spread ushering in the US recession going forward, unless the yield curve becomes more inverted and drops below -110 bips which is already rare multi-decade lows.

Note Added Friday Morning, 3/10/23, at 7:26 AM EST: The 2-year yield drops to 4.80%. The 10-year is at 3.84%. The 2-10 spread drops to -96 bips now un-inverting over 14 basis points from the -110 low. The hook pattern is alive and moving higher telling the US recession to get ready for its appearance.

Note Added Friday Morning, 3/10/23, at 7:39 AM EST: The 2-year yield drops to 4.78%. The 10-year is at 3.83%. The 2-10 spread drops to -95 bips.

Note Added Friday Morning, 3/10/23, at 8:00 AM EST: The 2-year yield drops to 4.76%. The 10-year is at 3.82%. The 2-10 spread drops to -94 bips.

Note Added Friday Morning, 3/10/23, at 8:02 AM EST: The 2-year yield drops to 4.75%. The 10-year is at 3.82%. The 2-10 spread drops to -93 bips.

Note Added Monday Morning, 3/13/23, at 5:18 AM EST: The US yields plummet on the Silicon Valley Bank failure; 2-year 4.35%, 5-year 3.80%, 10-year 3.61%, 30-year 3.67%. The 2-10 SPREAD UN-INVERTS UP TO -74 BASIS POINTS. IN ONLY 3 DAYS, THE 2-YEAR YIELD FALLS OVER 70 BIPS THE MOST SINCE THE 1987 STOCK MARKET CRASH. THE 2-10 SPREAD HOOK PATTERN LAUNCHES HIGHER FROM -110 BIPS TO -74 BIPS SIGNALING THAT THE US RECESSION IS LIKELY CLOSER THAN ANYONE REALIZES.