Traders of the Caribbean

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Treasury Yield Surge Is Poised to Pause: Technical Analysis
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By Wes Goodman

Aug. 12 (Bloomberg) -- The biggest weekly surge in Treasury 10-year yields in six years is going to pause, said Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd., citing trading patterns.

Yields will hover near 3.75 percent, versus today’s 3.67 percent, Rupkey said. The level represents a 50 percent retracement of the decline in yields that began in June 2007 and ended at a record low of 2.04 percent in December, he said.

“The bond market rout may not be over, but it looks like it might pause for awhile,” said Rupkey, who is based in New York for the unit of Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank. He sent his comments in an e-mail.

Ten-year yields climbed 37 basis points last week, the most since July 2003. They were as high as 3.89 percent on Aug. 10, the most in two months. The 3.125 percent security due May 2019 was little changed at 95 17/32 as of 11:32 a.m. today in Tokyo.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

Rupkey’s analysis is based on a sequence of numbers identified in the 13th century by Italian mathematician Leonardo da Pisa, known as Fibonacci. Yields need to move past one step in the series for the trend will carry over to the next.

To contact the reporter on this story: Wes Goodman in Singapore at [e-mail].
Last Updated: August 11, 2009 22:40 EDT