Bond Market – Monthly Analysis

CANDLES & TA:

If September’s monthly close was bearish, I can’t say the same about October. The candle failed to close below September’s low and now reads as potentially bullish, especially given the technical backdrop. The weekly attempted to base (unconfirmed), and the daily was rejected at the 50-DMA — a rejection, but not a forceful one. Technically, the 10Y yield looks close to a cyclical bottom, if not already there. One more marginal lower low could complete several patterns and reinforce a positive momentum divergence.

One more point on the term structure: the 2Y and 5Y momentum profiles are more constructive than the 10–20–30Y, hinting at a shift in the curve. This often precedes periods of macro uncertainty — think changing growth/ inflation expectations, rising term premium, and potential curve re-steepening from the front end. It’s a mid-term signal so far, but worth watching to see if it propagates into the long end; if it does, implications for financing conditions and broader risk assets become more consequential.

Overall, the very long-term outlook remains bullish, supported by monthly and higher-timeframe trends and technicals. Short/mid term is likely probing for a bottom and sits close to neutral.

All points discussed in the quarterly update remain 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
No change, refreshed the chart.

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

With both scenarios on the table, the very long term outlook remains strongly bullish. I added the red horizontal line. A move below will invalidate the red count and make the blue primary.

Mid Term

So far, the mid-term chart is playing out well. I’d like to see a new low in 2025 — below April’s low but above the 2024 low. In that case, I’d treat the current wave as an Ending Diagonal c of (b), likely followed by an even stronger wave (c) of B.

Spread 10Y-2Y
(no change, refreshed chart)

The 10Y–2Y spread remains in a long-term bullish trend. The rate of increase has slowed, but that’s not concerning at this stage.

Canadian 5-year Yield

Earlier we discussed a potential bullish flag developing on CA05Y. September closed decisively bearish; in October, however, it missed printing a bearish continuation candle by just 0.003%. I read this as an opening for a bottom via a Ladder Bottom combo. Perhaps one more month with a rate cut — and that would be it. If this hypothesis materializes, 2026 could be quite challenging for Canada.

SUMMARY

The last few days of October drastically altered the bond/yield landscape. The failures to print bearish continuation candles on the monthly frame are an early warning that we may be near a mid/long-term bottom. Yields can certainly drift lower, but there’s also a chance the Fed pauses further rate cuts — which, to be clear, it never promised. A similar setup is visible in the Canadian bond market.

Taking it all together, November could be a turning point for bonds. We’ll be watching developments across the curve and on the technical front closely.

Overall, the very long-term outlook remains bullish, supported by monthly and higher-timeframe trends and technicals. The short/mid term appears to be probing for a bottom and sits close to neutral.

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!