June 15 (Bloomberg) -- Treasury 10-year yields may fall to a six-month low of 2.8 percent if they break through a key level of resistance, Bank of Tokyo-Mitsubishi UFJ Ltd. said, citing trading patterns.
Rates will extend their downtrend if they drop below 2.97 percent, which represents the last 38.2 percent of their decline from last year’s high of 4 percent on April 5 to the Oct. 8 low of 2.33 percent, said Kenichi Imai, chief manager of proprietary trading at the unit of Japan’s largest bank, referring to Fibonacci analysis.
“U.S. 10-year note yields have a stronger bias toward a drop,” Tokyo-based Imai said, forecasting yields will range between 2.8 percent and 3.1 percent in the near term. “If rates resume declining again, they may fall toward 2.8 percent.”
The benchmark 10-year note yielded 3.08 percent as of 10:40 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The last time the yield was at 2.8 percent was on Dec. 1.
Ten-year rates dropped below 3.17 percent last month, breaching the 50 percent mark of last year’s decline. Rates had then stalled for almost two weeks near the 2.97 percent resistance level before closing at 3.10 percent yesterday.
Ten-year yields will climb to 3.14 percent by June, 3.42 percent by September and 3.63 percent by year-end, according to the weighted average forecasts of analysts surveyed by Bloomberg.
Fibonacci analysis is based on a theory that prices rise or fall by certain percentages after reaching a high or low. Key percentages include 23.6, 38.2, 50 and 61.8.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.
--With translation by Ritsuko Kameyama in Tokyo. Editors: Nicholas Reynolds, Nate Hosoda
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