Bond Market – Weekly Analysis

CANDLES & TA:

After a constructive close in December, US10Y has extended its advance into January. The recent 50/100 DMA bullish cross and today’s 8/20-week EMA bullish cross, together with supportive candlestick behavior and broader technical signals, point to a continued move higher. US10Y remains bullish until signaled otherwise.

Attention now turns to the Federal Reserve’s January 28 meeting. Yields across the curve have been gradually moving higher, raising the possibility of a more restrictive stance. In December, the Fed indicated some openness to additional rate cuts in 2026 but stopped short of committing, emphasizing data dependence. This lack of forward clarity appears to have unsettled markets, leaving participants reluctant to position aggressively. As a result, Nasdaq has traded largely sideways since early December, while other major indices have posted only modest gains. Absent clearer guidance from the Fed, a predominantly range-bound market environment is likely to persist.

The following key paragraphs are from the previous 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.

Annual 8-20 EMA Bullish Cross and 100 YMA

The annual 8- and 20-EMA lines finished December 31, 2025 separated by only 0.003%. As anticipated, the annual bullish cross occurred on January 2, 2026. At this level, such a cross is typically very sticky and would be expected to persist throughout the year even if yields retrace. A fully confirmed annual cross—pending the December 31, 2026 close—would mark the start of a long-duration bull market in rates, potentially analogous to the cycle observed between 1950 and 1980.

Looking further ahead, the next key milestone would be a successful reclaim of the 100-year moving-average support. The U.S. 10-year yield has already tested this level three times. A fourth test could prove constructive and would materially strengthen the case for very long-term bullish odds in rates.

ELLIOTT WAVES

Very Long Term
No change, refreshed the chart.

On a very large scale, the U.S. 10-year yield (US10Y) appears to have completed its first impulsive wave off the 2020 lows and is now developing wave ii.

Notably, this long-term chart has remained unchanged since December 2022—over three years—underscoring the stability of the broader structure and reinforcing the long-term outlook.

Long Term

No changes to the prospective for wave (2). The scenarios that we discussed in the annual review remain intact.

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

The 10Y–2Y spread ended the year with exceptionally strong bullish signals across all time frames, from the daily through the annual. It remains firmly in a long-term uptrend, reinforcing the view of a broadly healthy economic backdrop. The yield curve continues to display positive dynamics, with longer-dated yields showing stronger bullish behavior than shorter maturities. As a result, the probability of further widening in the spread remains elevated.

Canadian CA05Y

After a bullish close in December, the Canadian 5-year yield has entered a consolidation phase. Momentum for the next move will most likely be provided by the Bank of Canada’s decision on January 28, coinciding with the Federal Reserve meeting. For now, market pricing suggests that the Canadian bond market is leaning toward a rate hold.

SUMMARY

U.S. bond markets continue to send firm signals. Following a constructive December close, the U.S. 10-year yield has extended higher in January, supported by multiple bullish technical developments, including recent moving-average and EMA crosses on daily, weekly, and annual frames. These signals suggest that upward momentum in yields remains intact, with the broader structure pointing toward a continuation rather than a reversal.

From a longer-term perspective, US10Y appears to be working within a well-defined wave structure that has remained stable for several years. Annual-scale signals, including the early-January EMA cross, reinforce the view that rates may be entering a prolonged bullish phase. Attention now turns to the upcoming Federal Reserve meeting, which is likely to play a key role in shaping near-term direction, but until signaled otherwise, the technical outlook for U.S. yields remains constructive.

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!