Bond Market – Weekly Analysis
Bond markets rarely scream. They usually whisper first — through yields, curves, failed rallies, and quiet shifts in momentum. By the time the message becomes obvious, currencies, equities, housing, credit, and the broader economy are often already reacting.
In this report, we examine the latest technical signals across the U.S. and Canadian bond markets and outline why the next moves in yields may become one of the most important macro signals to watch. Bonds are now pointing toward events that may not feel urgent yet — but may already be becoming inevitable.
CANDLES & TA:
The US10Y is neutral, leaning bearish short-term, and recorded a bearish 8/20 EMA cross. However, the mid- and long-term odds remain bullish, with substantial technical support for moves higher. The mid- and long-term trends also remain bullish.
But the major signal comes from the curve. We can clearly see that short-term yields have become more bullish, while the longer end is leaning bearish. This imbalance is clearly visualized in the Spread section below.
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
(as 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 the largest timeframes, the U.S. 10-year yield (US10Y) appears to have completed waves i and ii off the 2020 lows and may have already started wave iii.
Notably, this long-term chart has remained unchanged since December 2022, for more than three years, underscoring the stability of the broader structure and reinforcing the long-term bullish outlook.
Long Term
Some technicals are beginning to support the view that the current move higher could be wave 3 of a larger degree. In a slow-moving market like bonds, a great deal of patience is required before confirmation arrives.
If this interpretation is correct, the next most probable target for the 10Y yield would be around 6% — a truly explosive move for the bond market.
Spread 10Y-2Y – Risk of Recession!
In April, the 10Y–2Y spread technically escalated bearish odds to the 4M frame. Since then, it has continued moving steadily toward the 0% level.
This week, the weekly frame recorded an exceptionally strong bearish move, leaving very little room for repair in the remaining days of June. At this point, the 10Y–2Y spread appears likely to record a semiannual Bearish Engulfing candle by the end of the month. That would represent another major escalation after the 3M and 4M bearish signals recorded in March and April.
The message from the curve is becoming increasingly difficult to ignore. The technical structure is no longer just warning about pressure — it is pointing toward a much larger macro transition. If these signals confirm, recession risk may move from “possible” to increasingly difficult to avoid.
Please refer to the April Monthly report for more details. All prior assessments remain intact.
Canadian CA05Y
The BoC left Canadian rates unchanged. The rate reacted by moving slightly lower on the chart, but the market has not made a decisive call yet.
At this point, the current monthly candle sits right on the boundary. It could still record either a consolidation signal or a reversal confirmation. The final result will be known on the last trading day of June.
SUMMARY
The bond market is sending a much more serious macro warning. While the US10Y is neutral to slightly bearish short-term after recording an 8/20 EMA bearish cross, the mid- and long-term yield structures remain bullish, with trends and technicals still supporting higher yields over time. Some signals are even beginning to support the possibility that the 10Y yield is developing wave 3 of a larger degree, with a potential long-term target near 6% if confirmed.
The more important message, however, is coming from the curve. Short-term yields are strengthening while the longer end is leaning weaker, creating a growing imbalance that is clearly visible in the 10Y–2Y spread. Since bearish odds escalated earlier this year, the spread has continued moving toward the 0% level. This week’s exceptionally strong bearish move leaves very little room for repair before the end of June.
If the 10Y–2Y spread confirms a semiannual Bearish Engulfing candle at month-end, it would represent another major escalation after the 3M and 4M bearish signals recorded in March and April. The message from the curve is becoming increasingly difficult to dismiss: recession risk is no longer just a background concern — it is moving toward the center of the macro outlook.
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.
