Time Horizon and Treasury Yield

The 10 year T-note yields (TNX) that we examined a couple weeks back broke above near term resistance last Friday. This break out suggests to many technicians that interest rates may be headed higher. On 10 yr Treasuries, resistance now resides above--perhaps at about 4%.

As noted in class, it often pays to review price action using different time horizons. The chart below shows the TNX using weekly data over the past 6 yrs. Note that a downtrend remains in place, although current yields are right at resistance as reflected by the downtrend line.

The final chart below shows ~ 20 years of monthly TNX data. The picture here suggests that the secular downtrend in 10 yr yields is firmly in place. Technically, this secular trend won't be broken unless/until 10 yr yields rise to nearly 4.5%--almost 100 basis points higher than current levels.

Nice demonstration of how the technical picture can change depending on the time horizon...

In the here and now, investors need to grapple with what rising long bond yields mean. Strengthening economy? Inflation? Increased borrowing costs? Changes to Fed policy?

Judging by recent stock market action, the 'dominant logic' seems to be that the rising interest rate picture is bullish for equities. Perhaps it is. But make sure you see the bearish picture as well, as there are surely two sides to this trade.

position in Treasuries