Bloomberg News

U.S. Yield Decline Faces Hurdle at 2.88%: Technical Analysis

June 22, 2011

June 22 (Bloomberg) -- Treasury 10-year yields will have difficulty pushing below 2.88 percent, according to Daiwa Asset Management Co., citing trading patterns.

A Fibonacci graph shows the level is a 61.8 percent retracement of an increase in rates from Oct. 8 to Feb. 9. Yields fell to 2.88 percent last week yet haven’t been able to close below the barrier. According to Fibonacci analysis, a failure to break past one level suggests a decline is ending.

“This is a strong resistance level,” said Tsutomu Komiya, who helps oversee the equivalent of $115.4 billion as an investor in Tokyo at Daiwa, a unit of Japan’s second-biggest brokerage by market value. “The market needs something new to drive yields through these levels” such as a weak June employment report, he said.

Ten-year Treasuries yielded 2.98 percent as of 6:45 a.m. in London, according to Bloomberg Bond Trader prices. Rates have fallen from February’s high of 3.77 percent. The next Fibonacci level after 2.88 percent is 2.67 percent.

The U.S. jobless rate unexpectedly climbed to 9.1 percent in May, the highest level this year, and hiring grew at the slowest pace in eight months, a Labor Department report showed June 3. Another report like that one would be enough to push yields to new lows for 2011, Komiya said.

Fibonacci analysis is based on a series of numbers developed by 13th century mathematician Leonardo da Pisa, known as Fibonacci, who was studying growth rates. Analysts use the numbers to determine levels where buy and sell orders may be set.

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

--Editors: Garfield Reynolds, Nicholas Reynolds

To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.


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