Treasury yields have entered what technical analysts refer to as a period of consolidation, which occurs when prices, or yields in this case, fall from their recent highs but not far enough to persuade traders that they are entirely reversing direction, following a significant increase at the beginning of the Iran conflict.
The movement of 10-year rates has begun to resemble a chart shape known as a “cup and handle,” which typically enhances expectations of a further climb during this consolidation phase. According to data provided by LSEG, the pattern is typified by an initial high—in this case, the peak of 4.484% in 10-year rates on March 27—followed by a U-shaped pullback and then another climb back toward, but not above, the previous peak. The “cup” shape on the chart is formed by this evolution. Ten-year yields must decline once more, but not significantly, to form the “handle” in a proper cup and handle pattern.
Technical experts would wait for a close above 4.484% after the handle forms, indicating that the previous uptrend in 10-year rates has resumed, which may push it up to 4.60 or higher. It’s unclear if a handle formed when yields dropped on Thursday and Friday or if it will occur later because the pattern is still in its early stages of development.
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