Benchmark 10-year Treasury yields may fall to the lowest level this year if they close below 1.8 percent, the lower end of a three-month range, according to Royal Bank of Canada, citing technical analysis.
This comes after the market failed to break above 2.08 percent this year, the highest level since April 2012, rejecting higher yields even as housing and employment data have improved, said George Davis, chief technical analyst for fixed income in Toronto at the bank’s RBC Capital Markets unit.
“We’ve had better economic data in general this year, and some resolution of the Cyprus issue, and still Treasuries rejected the top end of the range, and have performed strongly, meaning the bar is high for economic data to move the market,” Davis said at the Bloomberg News building in New York. “We are in an environment where growth expectations have been pushed up, so the market is much more sensitive to negative data.”
The U.S. 10-year yield fell three basis points, or 0.03 percentage point, to 1.78 percent as of 11:01 a.m. New York time, according to Bloomberg Bond Trader prices. It touched 1.76 percent, the least since Jan. 2, when it reached the 2013 low of 1.73 percent. The notes are forecast to trade at 2.30 percent at year-end, according to the median forecast of economists in a Bloomberg News survey.
Ten-year U.S. debt has gained 0.1 percent this year, rebounding in February and March after a 2 percent loss in January, according to Bank of America Merrill Lynch indexes. The broader Treasury market has returned 0.03 percent.
In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.
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