Bond Market – Weekly Analysis

CANDLES & TA:

It was quite an event today. The entire yield curve — 2Y, 5Y, 10Y, 20Y, and 30Y — closed the week with Bearish Engulfing patterns. This strongly suggests that the market is anticipating a rate cut in December. After such a move, another red week for yields is very likely; the main question is how deep rates might decline. For the US 10-year yield, in order to form a bearish monthly continuation candle on Friday, it needs to close below the October low. Any higher monthly close will be interpreted as either bullish or neutral — something to watch closely next week.

Overall, the very long-term outlook remains bullish, supported by the monthly and higher-timeframe trends and technicals.

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. A move below the red horizontal line 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

This is becoming interesting. In October, CA05Y missed printing a bearish continuation candle by just 0.003%. Now, if nothing changes next week, it could close November with a Bullish Engulfing. Are the candles hinting at a potential rate increase? That would be something, especially if the US cuts on the same day. Let’s see how the month closes.

SUMMARY

The entire US yield curve has signaled a strong bearish reversal after three weeks of increases. If this momentum continues next week, we can start discussing the possibility of a bearish monthly close, which would serve as an early signal for a potential FED rate cut on December 10 (we do need a Christmas rally, after all). The exact monthly closing print will be critical.

Based on the 10–2Y spread candle and the corresponding technical readings, the spread remains healthy, with higher odds of continued widening, which in turn supports ongoing economic activity.

The Bank of Canada presents an interesting potential deviation. There is a fair chance that its rate decision will differ from the FED’s move on the same day.

Overall, the very long-term outlook remains bullish, supported by monthly and higher-timeframe trends and technicals. However, the current monthly structure has a chance to flip the long-term picture bearish while keeping the quarterly and higher frames bullish. The next two monthly closes are likely to set the tone for 2026.

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!