Bond Market – Weekly Review

CANDLES & TA:

Bullish momentum continues to build for the US10Y. On Thursday, it formed a strong Bullish Engulfing on the 15-day chart, signaling renewed strength. In this context, the weekly doji appears to be more of a pausing candle than a reversal, especially as it held above all key support levels.

On the daily chart, the structure suggests a possible setup for a Rising Three Methods pattern — another bullish continuation signal. Overall, the 10-year yield has a higher probability of pushing further upward in the near term.

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 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 few years. A decisive break and monthly close above it in December 2025 would mark a significant long-term milestone.

Long Term

In both scenarios on the table, the long-term outlook remains strongly bullish.

CA05Y

No changes to the long-term outlook for the Canadian bond market. A strong green candle in July—if it materializes—could trigger an acceleration in the current trend. Be prepared.

Spread 10Y – 2Y

In recent weekly digests, I briefly highlighted the yield spread, which continues to present a compelling bullish structure. Both candlestick formations and technical indicators point to a sustained upward trend, suggesting that the spread is likely in the early stages of a larger expansion cycle.

A closer examination reveals a stronger bullish momentum in long-duration yields (“long money”) compared to more moderate momentum in shorter-term instruments. This divergence indicates that expectations for long-term economic growth and inflation are beginning to firm up, while short-term rates remain relatively anchored—possibly due to near-term policy uncertainty or muted immediate demand pressures.

Overall, the current spread dynamics may be signaling a meaningful boost in economic activity in the years ahead, with implications for monetary policy, bond market positioning, and broader macroeconomic sentiment.

SUMMARY

While the broader trend for interest rates remains firmly bullish following the June closure, short- and mid-term trends have shown some uncertainty. However, the latest candlestick formations and technical signals suggest a possible shift in bias—potentially bringing the shorter timeframes back in alignment with the long-term bullish outlook.

As it stands, Canadian yields are on track for a strong bullish closure on July 31. That said, the Bank of Canada’s rate announcement on July 30 could introduce volatility and potentially disrupt the current trajectory. For now, patience is warranted. Until clear evidence of reversal emerges, the broader outlook for yields remains bullish.

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!