Bond Market – Weekly Analysis
The move in yields is accelerating. The US10Y has surged over 12% in just four weeks and is now on track to lock in strong monthly signals.
What looked like a gradual shift is turning into a decisive trend — and the implications are starting to ripple across markets.
In this analysis, we break down the structure, momentum, and key technical signals to assess what is changing beneath the surface — and where this move is likely headed next.
CANDLES & TA:
After printing a weekly Bullish Engulfing at the beginning of March, the US10Y has surged more than 12% in one month. The short- and mid-term trends are now firmly bullish.
Rates are on track for solid bullish closures on both the monthly and quarterly frames, unless a very strong reversal occurs in the final two trading days.
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.
ELLIOTT WAVES
Very Long Term
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, potentially signaling proximity to a bottom.
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
Some technicals are beginning to support the view that the current move higher is wave 3 of a larger degree. If this interpretation is correct, the next most probable target for the 10Y yield would be around 6%—a truly explosive move. As of now, it stands at 4.4%.
Spread 10Y-2Y – Risk of Recession?
In the March 6 analysis, I noted that “the 10Y–2Y spread closed February with a bearish candle, potentially marking the top of wave 3.” The situation is now deteriorating faster than initially anticipated. The spread is currently tracking toward a confirmed top on the monthly frame (the 10Y–2Y spread needs to close below 0.532%), with potential reinforcement from a Bearish Engulfing on the quarterly frame. This would significantly escalate the bearish outlook.
Such a shift could mark the beginning of a much deeper retracement, potentially driving the spread back into negative territory and invalidating the long-term impulsive structure. These signals may serve as early harbingers of a broader and more prolonged reversal, potentially pointing toward a lengthy recessionary phase.
Canadian CA05Y
The Canadian 5-year yield continues to track toward a strong bullish monthly close. The Bank of Canada left rates unchanged on March 18, which could prove to be a major miscalculation.
SUMMARY
The bond market is approaching a point where the signals become increasingly concerning. U.S. 10Y yields are accelerating higher after a strong bullish reversal, breaking above key moving averages and tracking toward solid monthly and quarterly closures. The structure is starting to resemble a potential wave 3 extension, which, if confirmed, would open the door to a much more aggressive move in rates. What feels like panic now was clearly signaled by the technicals weeks ago — the market is catching up.
At the same time, the 10Y–2Y spread is nearing a critical threshold that could confirm a top on the monthly frame. A failure at this level, reinforced by a bearish quarterly structure, could trigger a deeper retracement, potentially pushing the spread back into inversion and signaling the early stages of a broader economic slowdown.
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.
