Bond Market – Weekly Analysis

CANDLES & TA:

Bond yields appear to have firmly rejected the downside. The daily candle failed to confirm a bearish move, the 2-day candle held above major support levels, and the weekly and larger time frames closed with bullish candles. Notably, the weekly chart recorded an 8/20 EMA bullish cross.

Short-term, the outlook is neutral, but the mid- and long-term perspectives are bullish.

After a neutral—but potentially bullish—monthly candle in April, yields are now gaining upward momentum. If this strength continues through May, the monthly chart could flip fully bullish, opening the door to higher rates.

From a broader view, the long-term trend remains clearly bullish. Structural indicators—such as aligned moving averages and continuation patterns—continue to support the case for elevated yields over the coming quarters, and possibly years. Unless clearly invalidated, the bullish scenario stays in place.

The following key paragraphs are from the previous monthly analyses, and I keep them for a long-term reference:

From the April 2024 monthly: “The yield ended in April with strong bullish candles across multiple frames and long and very long term odds remain bullish. The monthly frame recorded a 50/200 MMA “golden” cross at the beginning of May. It did not happen for 72 years. After it was recorded last time in 1952, the rates rallied for 30 years and reached 15.82% in 1981.” The cross expanded wider in May and we have no reasons for considering a reversal in this department.

I’d like to remind that in 2023, US10Y recorded several very long term signals, such as 8/20 EMA crosses on the quarterly and semiannual frames, which are extremely rare. For example, the quarterly 8/20 EMA cross last time happened in 1955. Following the cross, there were 26 years of rate increases from 2.7% to 15.8%.

RATE of GROWTH
(initially discussed on February 9, 2023)

In 2023, I discussed certain events and compared them to similar occurrences in the 1950s, noting that everything seems to be happening faster in the bond market this time around. The pace is markedly different, and I continue to maintain this hypothesis.

Looking at the annual candles, it’s evident that the current sets and the rate of growth are far more agile compared to the mid-20th century.

From 1940 to 1950, it took 18 years for the 10-year yield to climb from the bottom to 4.5%. This time, that same rate was achieved in just 4 years—a pace 4.5 times faster. If this trajectory continues, we could witness a strong acceleration in the coming years, potentially completing the current cycle by 2029-2030. It’s certainly something to keep in mind.

ELLIOTT WAVES

Very Long Term

On a very large scale, the US 10-year yield (US10Y) completed its first impulse wave from the 2020 lows. Wave ii may get extended for a few quarters, horizontally or slightly downward.

Notably, this chart has remained unchanged since December 2022, reinforcing the long-term outlook.

100-Y Moving Average

The recent upward move in the US10Y is bringing it closer to the 100-year moving average—an important long-term level. This line has been tested several times over the past year. A decisive break and monthly close above it in December would mark a significant long-term milestone.

Long Term

At this point, it’s still unclear whether the recent wave down was wave 2 of (3) or a final truncated wave c of (2). In both scenarios, the outlook remains strongly bullish.

US20Y may have completed wave 2, along with waves i and ii of wave 3. If this count is correct, the next wave up could be a strong and rapid advance.

SPREAD 10Y-02Y

The spread candles continue to build bearish momentum. Another key development occurred as the 15-day frame formed a significant Bearish Harami. If confirmed, it will further strengthen the case for a developing top.

CA05Y

The CA05Y yield closed April with a strong Bullish Engulfing candle, and upward pressure continues to build. If this strength is confirmed in May, Canadian yields could accelerate in the coming months, potentially signaling the start of another major leg higher in the broader rate cycle.

SUMMARY

The broader trend for interest rates remains firmly bullish across the quarterly, semiannual, and annual time frames. April’s closure reinforced this strength by avoiding a bearish monthly outcome and highlighting the persistent upward pressure from the larger time horizons.

Since early May, multiple significant bullish candle formations have appeared on the short- and mid-term charts, pointing to the potential for continued yield expansion.

A major technical development was the 100/200-month moving average golden cross on the US10Y, completed in December 2024. This rare event—backed by several long-term indicators not seen in decades—marked a structural shift, signaling the transition into a sustained higher-yield environment. Within this context, any short-term pullbacks are likely to be corrective, rather than trend-changing.

From the previous analyses:

In 2024 and 2023, US10Y recorded several strong technical events that hadn’t occurred for decades, making it very difficult to reverse these trends. This suggests that higher rates are almost guaranteed in the coming years.

US10Y is also close to recording another significant event—a cross above the 100 annual moving average (MA) resistance line. This has not yet happened, and we are closely monitoring it, though it will require a lot of patience.

I would like to reiterate (as discussed earlier) that a prolonged period of higher rates is not necessarily damaging for markets. If we look at the period from the 1950s to the 1980s, a time of increasing rates, the markets grew on average 6-7% per year. We might see a similar trend in the coming years.

Happy Trading!