UST2Y 2-Year Treasury Note Yield Daily, Weekly and Monthly Charts; Overbot; Negative Divergence Across All Time Frames; Recession Versus Soft Landing/No Recession Scenarios Explained

The 2-year yield is topping-out in the daily, weekly and monthly time frames. Humorously, everybody and his brother on Wall Street call for higher and higher yields the complete opposite forecast. They will be surprised.

The overbot conditions and most importantly, the universal negative divergence across all chart indicators across all three time durations, seal the fate for the 2-year yield. It is always price down yields up and price up yield down for Treasury notes and bonds. Thus, the 2-year yield note being bot (price up) means the yield will move lower (as the charts above expect) and this scenario would occur if the US is in recession and investors and traders seek perceived safety in Treasuries (price up yield down).

Yields continue inching higher yesterday and then relax again today. The 10-year sits at 4.30% running up to 4.34% yesterday. Mortgage rates are the highest in over 2 decades with the 30-year fixed moving towards 7.5%. The 30 was 200 bips (2 percentage-points) lower a year ago. Wall Street analysts continue touting higher rates for longer and the soft landing/no recession outcome.

There are two potential outcomes ahead; recession or the soft landing/no recession scenario. The yield curve (2-10 spread) will dis-invert, now in the -60's bip range, and steepen going forward, regardless of the outcome ahead. The yield curve has to re-steepen for a return to normalcy, whatever that is now that America's crony capitalism system is in its last throes.

Remember, the -40 bips area for the 2-10 spread will take out the previous highs and announce a recession with high probability. Thus, for the two scenarios, a soft landing and no recession outcome means the long duration yields (10's and 30's) will move higher faster while the recession scenario will send the 2-year yields lower faster. The technicals say yields are topping-out as explained. The charts above say the 2-year yields lower and recession scenario is more likely.

Pope Powell speaks to the minions on Friday morning from Jackson Hole, Wyoming. Note that the weekly chart shows the 2-year yield violating the upper band a few weeks ago so the middle band at 4.57% remains in play. The current yield at 5.00%-ish does not yet violate the upper band at 5.26% although it does not have to since the last violation remains in play. Nonetheless, this is mentioned because Powell's words on Friday morning will impact Treasury yields, the dollar and stocks.

If Powell's comments create more lift in yields, the 2-year may want to sneak higher towards that 5.26% but this would only be due to the words from the Federal Reserve. The charts are cooked in terms of yield. If yields inch higher due to Powell's words on Friday or at the September meeting coming fast, those spurts higher should be short-lived for a couple weeks or so and then the chart set-up above will be back in place wanting to send yields lower.

In real-time on Tuesday morning, yields are; 2-year 4.99%, 5-year 4.44%, 10-year 4.31%, 30-year 4.42%. The 2-10 spread (yield curve) remains inverted at -68 bips (499-431). All Hades will likely break loose when the 2-10 spread dis-inverts to -40 bips and higher. 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 8:43 AM EST: Former New York Fed head Bill Dudley proclaims that the US shifts into a high-yield mode. Dudley decrees that yields have nowhere to go but up from here. Other analysts are calling for 6% yields. Everyone is convinced that yields will continue higher from here for many months into the future. Everyone is partying on the 'higher yields forever' side of the boat while Keystone is sitting by himself on a broken lounge chair on the 'yields peaking out and heading lower' side of the boat. Keystone does not get invited to the big fancy banker parties because he brings a wet blanket. Maybe they will come over to the lower yield thinking once the band begins playing on this side of the boat. Light 'em up boys. A Million Miles Away.

Note Added Thursday, 8/24/23: The yields are; 2-year 4.98%, 5-year 4.37%, 10-year 4.20%, 30-year 4.27%. The 2-year popped above 5% and pulls back. The 10-year hits 4.34% and then pulls back. Yields drop due to the neggie d explained above. The 2-10 spread (yield curve) remains inverted at -78 bips. The long end yields come down faster than the short end because Pope Powell speaks tomorrow morning. There is more drama ahead.

Note Added Wednesday, 8/30/23: The yields are; 2-year 4.90%, 5-year 4.30%, 10-year 4.15%, 30-year 4.25%. The short-end yields fall faster as traders think the Fed may be done hiking rates. The 2-year yield ran up to 5.10% then collapsed to 4.87% (huge 23-bip drop) yesterday now 4.90%. More analysts are following Keystone expecting lower yields going forward. Yields receive the neggie d spankdown. It's not rocket science, and Keystone knows rocket science. Simply follow the charts.