2Y Yields Lower

US02Y

2Y Yields heading lower.

Sometime over the next 12-18ish months, I believe we'll see 2Y yields fall to 200-275 bps.

Headline inflation numbers are lower and dropping.

The Fed has effectively pulled a rabbit out of a hat in the act of raising interest rates by ~500+ bps, while avoiding the obliteration of the economy. (thus far)

If the economy does falter in the coming months; the Fed will lower rates.
(No further explanation needed)

Despite the endless repetition of "higher for longer" from Fed officials; I believe that the Fed will lower rates even if the economy and markets remain strong.

The establishment powers in the political & financial world's that the Fed straddles both crave the same thing... Cheap Debt.

In addition to this, there are over $34+ Trillion reasons to lower rates as soon as possible.

Not to mention, the upcoming election...

The market is anticipating lower yields as well.

We're seeing the market preemptively increase exposure to interest rate sensitive assets.
(i.e. - tech stocks, indices, cryptos, beaten down govt bonds, etc.)

On a technical basis, the weekly chart of 2Y Yields is showing substantial bearish divergence.

Weekly RSI shows a bearish RSI Swing Rejection (March '23 and October '23 highs)

The 50% & 61.8% Fib levels give us a target of 200-275 bps.

The median line set suggests that yields could arrive at the target area sometime between May '24 - May '25.

Conclusion: Short Yields.


Fat_Fat

Commentaire:

Bearish Swing Rejection

Commentaire:

Keeping an eye on the weekly chart for a break of the 50-ema.

In March '23 the 50-ema held, a break bolsters the bearish case.

Not there yet, but we'll see what happens.