Death Cross Formed In 10-Year Yields

10-Year Tsy yields have crossed the 200-DMA on several occasions in recent weeks, watering down its importance as a technical indicator. Still, 10s held below the metric (in yields terms) on a closing basis on Wednesday, with the fixed income benchmark hovering around the middle of its summer range. We should also point out the formation of a death cross in recent days, with the 50-DMA crossing below the 200-DMA, a potentially bearish technical signal for yields.

• Looking ahead, BMO have noted that "in terms of the implications for U.S. rates coming out of Friday's jobs numbers and into the September FOMC, we're apprehensive that the August payrolls data holds the needed weight to inspire a break of the top of the trading range in 10-Year yields at 1.42%. Even the 1 million jobs added in July's release was only enough to bring 10s to 1.378% in an environment defined by hiring plans that did not yet reflect variant uncertainty and delayed return to office plans. There will eventually come a time when yields are higher and the curve is steeper - but that will need to be a function on the passage of time and ongoing progress in undoing the pandemic's damage."

Fig. 1: U.S. 10-Year Tsy Yield (%)

Source: MNI - Market News/Bloomberg