It's not the most exciting of weeks for bonds, as the action has trended rather sideways. 10-year yields in the US have been sticking around 4.20% to 4.25% for the last few days. And for the most part, that owes to some technical pull as seen in the chart below:
The confluence of the 100 and 200-day moving averages at 4.191% to 4.208% is holding yields in a tight grip. That considering that traders have little in terms of economic data and headlines to work with during the week.
But after finding a double-bottom and then a double-top, yields are now put in a spot where traders have to dig deep to justify their convictions.
Besides the pull of the moving averages above, there is also the trendline support (white line) for yields around the 4.14% mark. In that sense, one can also point to a triangle pattern forming on the chart above.
As such, the argument can be made that a break of that pattern could see yields move much more significantly next. But whether that move will be a break higher or lower will ultimately depend on one question. And that is how is the market feeling about a June rate cut by the Fed?
Currently, the odds priced in for that are ~68% based on Fed funds futures. That is not an overwhelmingly convincing signal by any stretch of the imagination. It means that traders will still need to rely on more economic data before firming up any further convictions.
If anything else, this further solidifies the notion of how data dependent this market really is in its current state. And you only have to look at the lack of meaningful price action throughout this week to confirm that.
