- The 40-year bull sell in bonds could be on its last legs as interest rates continue to rise.
- The implications are wide-ranging as higher interest berates often translate into lower stock prices.
- A chart of the 10-year US Treasury yield includes “the most significant trend line of all time,” Carter Worth said.
The 40-year trend of declining attentiveness rates could be on its last legs as the 10-year US Treasury yield tests resistance against “the most important drift line of all time,” according to technical analyst Carter Worth of Worth Charting.
Bond prices rise as enrol rates fall, but amid a period of record inflation and an expanding economy, the
Federal Reserve
is raising interest deserves to help cool down demand and tame inflation.
Now the widely-followed 10-year US Treasury yield is pushing against its 40-year downtrend a candidate for that starts with the 1981 peak in interest rates of 15.81%.
“The all-data log chart for US 10-Year Treasury Bond incomes is the most important trend line of all time, ever, in any and all markets,” Braxton tweeted on Monday. It’s so important because whether the 10-year profit breaks higher or gets rejected and moves lower from here will have wide ranging essences for the stock market and risk asset pricing in general.
If the 10-year US Treasury yield decisively breaks above its 40-year downtrend, that could be assured as the start of a new uptrend, which would mean a continued rise in interest rates and ongoing pressure on stock sacrifices. But if the 10-year yield gets firmly rejected at the downward sloping trend line, one could expect a continuation of quieten interest rates for longer, which could help boost valuations for risk assets and drive stock payments higher.
“This is the exact same trend line in effect since the 1981 peak, and that line rush at into play at 2.81% … how we react to this line really determines a lot. Were we to back away because
economic downturn
type things are coming, or do we really push through in a meaningful way,” Worth said to CNBC on Monday, adding that he doesn’t assume there’s much room left for yields to advance higher.
If Worth is correct in his assessment, that would be a acceptable sign for stock market investors, who already suffered a more than 10% correction in the S&P 500 earlier this year.
But the 10-year US Exchequer yield hit 2.83% on Thursday, which is slightly above the line in the sand that Worth is closely monitoring. Unless gains quickly halt their upward trajectory, the going could get even tougher for the stock market.
The Fed’s plan to hike diversion rates by 0.50% in May could be the final nail in the coffin for the 10-year Treasury yield to end its 40-year downtrend and start a new long-term uptrend, effectively close a decades long
bull market
in bonds.