Bloomberg News

Treasury Yield May Touch 1.8% on RSI Chart: Technical Analysis

June 05, 2012

Ten-year Treasury 10-year yields may rise to 1.8 percent, a two-week high, CIBC World Markets Inc. said, citing trading patterns.

Treasury rates on June 1 fell to a record 1.4387 percent, pushing the 14-day relative-strength index to 20.45 percent, less than the level of 30 that signals to some traders that yields have declined too fast.

The term premium, a model created by economists at the Federal Reserve, was negative 0.86 percent yesterday after closing June 1 at minus 0.94 percent, a record. The average over the past year is negative 0.44. A reading less than zero indicates investors are willing to accept yields below what’s considered fair value.

“Yields hit the record low and entered into excessive levels based on RSI as well as the valuation index developed by the Fed,” said Kazuaki Oh’e, executive director at the debt, currency and distribution unit of Canada’s fifth-largest lender. “Treasury yields may approach 1.8 percent.”

Ten-year yields rose two basis points, or 0.02 percentage point, to 1.59 percent at 12:05 p.m. in Tokyo, according to Bloomberg Bond Trader prices. The 1.75 percent note due May 2022 fell 5/32, or $1.56 per $1,000 face amount, to 101 14/32.

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

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

To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net


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