Last week was ugly for the bond market even though much of the ugliness was due to the immense rally of the previous week. By Friday, rates were able to avoid making new highs for the first time. There was some hope that the selling spree had found support heading into the weekend. Then this week brought the pain early and often with Ukraine peace talks, central bank tightening, and inflation in focus. After giving it 18 hours to settle down, the bond market reaction to yesterday’s Fed announcement has turned out to be flat. Bond bulls are hoping to keep it flat, but on guard against a breakout of another technical ceiling.
Today’s chart shows 2 examples of rates rising in the first half of the week and finding support by Friday. In the case of the 2.06% ceiling, the push back toward lower yields was victorious, but notably, it required help from the Ukraine invasion news. The 2.0% example is from last week. It clearly shows the waning momentum on Thu/Fri (2 smallest candlesticks of the week and both topping out at the same level).
The current iteration is a bit different in that the peak arrived earlier due to Fed day. Moreover, the subsequent day (today) has had more of a “reversal” vibe than that of waning upward momentum. But if we change to hourly candlesticks, we can see a tendency to treat 2.16% as a technical level (both in terms of support and resistance) with 2.21% serving as the modal ceiling in the event weakness returns before the weekend. The true test of these levels will occur at the beginning of next week, assuming we can hold below them for now.