Both US and German bond yield enjoy solid rally today despite poor economic data. Sentiments are generally lifted by optimism on US-China trade negotiations despite lack of concrete news on the progresses. Nevertheless, German 10-year yield turns positive for the first time since late March, and that’s significant. Meanwhile, US 10-year yield also breaks 2.5% handle.
10-year yield (TNX) hits as high as 2.524 so far today. The extended rebound is not too much of a surprise considering that it was supported just above 61.8% projection of 3.248 to 2.554 from 2.759 at 2.330. For now, we’d maintain that sustained break of 2.554 support turned resistance is needed to be the first sign of trend reversal. Otherwise, the currently rebound is nothing more than a corrective recovery.
To put it into longer term perspective, TNX is actually still limited well below long term channel support. Current development suggests that fall from 3.248 is at least corrective whole up trend from 1.336. And, further decline is in favor to 2.034 cluster support before bottoming. So, it’s too early to be optimistic.
