Bond Market – Weekly Analysis

CANDLES & TA:

Yields made an aggressive move early Friday, attempting to confirm the initial bearish signals from Thursday. However, broader bullish momentum quickly took over, and by the end of the day, all maturities—except the 5Y—failed to confirm a bearish reversal. The US10Y came particularly close, missing confirmation by just 0.002%.

The weekly chart had the potential to print a strong bearish candle if the market had closed on Thursday, but Friday’s rally shifted the tone entirely, producing a bullish continuation instead. If bullish momentum carries through Tuesday, the 10-day frame is likely to confirm an extended move higher.

In the short term, the outlook is neutral. However, both the mid- and long-term perspectives remain bullish.

Following a neutral—but potentially bullish—monthly close in April, yields have begun to build upward momentum. If this trend holds through May, the monthly chart could fully flip to bullish, opening the path to higher rates.

From a broader perspective, 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 remains intact.

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
(no change)

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 and is riding along wave 3.

SPREAD 10Y-02Y

The spread continues to struggle in its attempt to establish a sustained upward rally. As a result, bearish candles are printing across multiple time frames, gradually building what could become a significant topping formation. The inability to gain momentum adds weight to the bearish outlook.

CA05Y

The CA05Y yield closed April with a strong Bullish Engulfing candle, and upward pressure has continued to build. As of now, May is shaping up to close with a solid bullish continuation candle—another strong signal that Canadian yields may be entering a larger upward phase.

The next key event is the Bank of Canada’s rate decision on June 5, 2024. While the market had been leaning toward possible cuts earlier this year, the recent action in the 5-year yield suggests those expectations are fading. Either the bond market is pricing out cuts, or it’s starting to react to stickier inflation and stronger economic data.

This is especially important for Canada’s housing market, where the 5-year fixed mortgage dominates. Rising 5-year yields mean higher borrowing costs, and if this trend continues, it could hit both new buyers and those renewing at much higher rates. With affordability already stretched in many regions, higher rates may push the housing market into another cooling phase.

If May closes with strength and the BOC stays hawkish in June, we could be looking at the beginning of a more lasting move higher in Canadian yields.

SUMMARY

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

Since the beginning of May, we’ve seen multiple bullish candle formations along with repeated failures to generate meaningful downside momentum—both of which point to the potential for continued yield expansion.

A major technical milestone came in December 2024, when the US10Y completed a rare 100/200-month moving average golden cross. This long-term signal—supported by several structural indicators not seen in decades—marked a significant shift, signaling a likely transition into a sustained higher-yield environment. In this context, short-term pullbacks are best viewed as corrective, not trend-ending.

Canadian yields are showing early signs of aligning with this broader trend. The CA05Y, in particular, has built strong upward momentum since its bullish April close and is now on track for a bullish continuation in May. If this strength holds—and especially if the Bank of Canada reinforces the move with a hawkish tone at its June 5 decision—we may be witnessing the beginning of a more synchronized and durable rate upcycle across North America.

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!