10Y Treasury Yields Just Did Something Every Bond Bear Was Waiting For

10Y Treasury yields just crossed 2017's Maginot Line of 2.40% - the highest in six months...

 

Following Jeff Gundlach's bearish bond perspective, and the signals from the commodity/reflation markets...
 

Citi is warning that 2.39-2.40% is HUUUUUGE on the US 10 year yield

A break of this resistance (close) would strongly suggest a move to re-test the trend highs at 2.63-2.64%. This follows a positive outside month in September throughout the curve (2’s, 5’s and 10’s) for the first time since May 2013.

Levels under threat are

  • 2.39%: July high; 61.8% pullback of March-Sept fall in yields; top of downward sloping channel
  • 2.40%: October high

A close above this range would target a re-test of the March 2017/ December 2016 highs at 2.63% and 2.64% respectively.

The only thing potentially holding back this next leg higher is the record speculative short positioning in Treasury futures... which additionally saw a massive short addition last week...

 

Notably this sell-off has been accompanied by a significant steepening of the yield curve (from 10 years flats)...

Ian Lyngen at BMO Capital Markets called curve steepening “the new dip-to-buy,” with flattening looking like “the path of least resistance.”

“I still favor a curve flattener,” Justin Lederer, an interest-rate strategist at Cantor Fitzgerald said. “Short-term rates are creeping higher from the Fed, and the long end is held in check with inflation running at low levels.”