Treasuries opened better this morning, the 5-year below Friday's lowest yield, but now a lot of damage needs to be undone.
Friday's closes were mixed, the same as the openings, but the losses for the week were the largest in nearly a year.
After months of sideways trading, on January 20th the 5-year yield reached its highest level since August 1st before reversing and trading to its lowest yield since October of 2024 on February 27th. That day turned out to be a bearish 1-day island and by Friday the 5-year had traded back through the high yield it had left on January 20th.
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The longer maturities look similar, but the extremes aren't as notable. Overbought/oversold oscillators have reached extremely oversold levels on the daily charts but if yields have begun new up-trends, they can stay that way. They reached equivalent overbought extremes during the second week of February and stayed that way for the rest of the month; the same oscillators on weekly charts are only just coming away from overbought readings.
I occasionally address moving averages and I can only say that they offer nothing that might cheer anybody up, not on daily or weekly charts, but fortunately for me, I don't rely on oscillators or averages due to their inherent lagging nature.
I do rely on wave patterns and if that are going to work, or maybe I should say if they have been working, then my outlook remains the same as it had been for quite some time; treasuries are likely still in large degree B-waves of ABC corrections, which began at the October 2023 yield crests, and that means yields are likely still headed higher with eventual targets close to and possibly even beyond 5% for the 5-year and 10-year. That said, it won't be a one-way street and once the B-waves are over, the best rallies since 2020 should develop.
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One thing I did notice on Friday, perhaps the only potentially good thing, was that at the February 27th yield trough, the 30-year yield broke 1.7 bps below a trendline drawn from April 4th of 2025 before reversing, while on Friday it traded 1.5 bps above a trendline drawn from its May 22nd yield crest. That may mean nothing but one can always hope.
The FOMC meeting is on Wednesday and as of this morning the next rate cut will be in December.
