Bloomberg News

U.S. Yields May Climb to 3.4% on Fibonacci: Technical Analysis

July 05, 2011

July 6 (Bloomberg) -- Treasury yields may rise to a two- month high of 3.4 percent after breaking above a key Fibonacci level last week, BNP Paribas Securities Japan Ltd. said, citing trading patterns.

Ten-year rates advanced to 3.22 percent on July 1, climbing above the threshold of 3.19 percent that represented a 38.2 percent retracement of their decline from this year’s high of 3.77 percent on Feb. 9 to 2011’s low of 2.84 percent on June 27, a Fibonacci chart shows.

“U.S. yields seem to have bottomed,” said Tomohisa Fujiki, an interest-rate strategist at the unit of BNP Paribas SA in Tokyo. “Yields may next test 3.3 percent or 3.5 percent,” especially if the outlook for the U.S. economy continues to improve, he said.

The benchmark 10-year note yielded 3.12 percent yesterday, according to Bloomberg Bond Trader prices.

The next target for yields is now 3.4 percent, which represents a 61.8 percent Fibonacci retracement of the February-to-June decline, Fujiki said. The yield was last above 3.24 percent on May 12.

Fibonacci analysis is based on a theory that prices rise or fall by certain percentages after reaching a high or low. Key percentages include 38.2, 50, 61.8 and 76.4. A break above resistance or below support, indicates a currency may move to the next level.

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

To contact the reporter on this story: Yumi Ikeda in Tokyo at yikeda4@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at Rswift5@bloomberg.net


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