Bond Market – Weekly Review

CANDLES & TA:

After a brief rally, yields plunged, affecting both the daily and weekly frames. The weekly candles remain near neutral and continue to move within the well-defined range we’ve discussed. In the short term, the odds favor a move lower. The U.S. 10-Year yield remains bullish on the long-term horizon, while the mid-term picture is range-bound and awaiting a decisive break. As noted before, we could be waiting for such a break for a long time—months or even years.

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 or even years, 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.

Spread 10Y-2Y
(no change)

The 10Y–2Y yield spread remains in a bullish upswing, and the probability of continued strength has increased on the larger technical frames. A historical comparison places the current advance alongside the steepenings of 2020–2021 and 2008–2010. This suggests the market may be at the very start of a significant rally that could extend 1–2 years.

Earlier, we noted candle signals pointing to rising market confidence and fading near-term recession risk. We now have the technical backing to support that view.

SUMMARY

July’s close kept the monthly and broader trends in interest rates firmly bullish. Meanwhile, the short- and mid-term trends remain locked in a well-defined range on the weekly chart. Until a decisive breakout occurs, rates should be treated as neutral. The back-and-forth, range-bound move could persist for a long time.

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!