The Federal Reserve will tell you it is data dependent. This is true: The committee responded to roaring inflation in historic fashion, raising rates eleven times out of twelve meetings from March 2022 to July 2023. But there’s a much bigger factor at play, one that we know very well – the market. The market, in the Fed’s case, is the 10-year Treasury yield . Just like a stock chart won’t tell us much about a company’s impending earnings report (especially if the actual numbers are much different than estimates), the chart of the 10-year yield can’t predict what the Fed will do at any particular meeting. However, for both stocks and bonds, the charts can help us understand the underlying trends, patterns and the pertinent support and resistance levels. The first thing to consider is this: The 10-year yield has been leading the Fed since 2018. And over that time, there have been two major inflection points: In October 2018, the 10-yearrate started to roll over and continued to fall through most of 2019. The Fed followed the market’s lead but didn’t start to cut until July 2019 — eight months later. Then Covid-19 hit and crushed them both. Coming out of Covid, the 10-year yield bottomed in August 2020 and kept going … the FOMC finally acquiesced, but not until March 2022, initially believing that inflation was transitory. Aggressively playing catch-up for 16 months was a major factor in risky assets crashing. Most recently, the 10-YearYield has been trading between 3.8% and 4.2%, the top of which is close to its prior 2022 peak. Thus, on a net basis, it’s flat over the last 16 months. Is it any surprise that the Fed also has “paused?” And now with the Fed rumored to be closer to cutting rates than raising them, they will be — once again — looking for the 10-year for guidance. What the current technicals say That takes us to the current technical set-up. And coincidence or not, the 10-year yield is at a critical spot chart-wise, trading just below two…
2024-01-31 12:35:00
All news and articles are copyrighted to the respective authors and/or News Broadcasters. VIXC.Com is an independent Online News Aggregator