Bond Market – Monthly Analysis

CANDLES & TA:

I think there is a very gruesome message coming from the bond market, particularly from the 10Y. The 10-year yield monthly candle confirmed a bullish monthly reversal and reclaimed the 8 EMA support after six months. This move also effectively prevented an 8/20 EMA monthly bearish cross from taking place.

The weekly frame is bullish after recording an 8/20 EMA cross two weeks ago. The daily reclaimed the 200 DMA and formed a golden 50/100 DMA bullish cross.

While the FED announced a pause in January, the bond market is applying strong pressure, early signaling a potential rate hike at the next meeting.

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 or about to complete 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. If the current advance morphs into an impulsive wave, the red count will become primary.

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

After ending the year with exceptionally strong bullish signals across all time frames, the 10Y–2Y spread closed January with a bullish formation, 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 consolidated for a month. Momentum remains bullish, although not as strong as that of the US 10Y.

This suggests that while the FED could surprise markets with a hike at the next meeting, the Bank of Canada has better odds of holding rates.

SUMMARY

U.S. bond markets continue to solidify the case. Following a constructive December close, the U.S. 10-year yield has confirmed a bullish reversal on the monthly frame with a very solid technical backdrop. Unless this bullish pressure is reversed in February, the next FED decision could be a hike.

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 8/20 EMA cross, reinforce the view that rates may be entering a prolonged bullish phase.

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!