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July 29, 2021, 3:49 p.m. EDT

10 and 30-year Treasury yields are caught in a ‘death cross’

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By Vivien Lou Chen

Long-term Treasury yields are stuck in a so-called “death cross,” or technical pattern that suggests they may keep falling even lower from here.

That is the view of Dimitri Delis, a senior econometric and macro strategist at Piper Sandler Cos. who is based in Chicago. He points to the 10- and 30-year Treasury yields’ 50-day moving averages, which have now both fallen below their 100-day moving averages.

The point where the 50-day moving average crosses below the 200-day MA is usually referred to by technical analysts as a “death cross,” with such breaches seen as the spot where a shorter-term pullback evolves into a longer-term downtrend. Delis views the cross of the 50-day MA beneath the 100-day as equally ominous.

The recent drop in the 10-year rate /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -2.17% and 30-year yield /zigman2/quotes/211347052/realtime BX:TMUBMUSD30Y -1.77% to around some of the lowest levels since February has puzzled many who had expected those yields to rise amid strong U.S. economic growth and higher inflation.

Dan Eye, head of asset allocation and equity research at Fort Pitt Capital Group based in Pittsburgh, said low yields reflect the “tremendous amount of demand for high-quality, yield-generating assets by institutional investors, like pension funds and insurers, who have a mandate to go into those government securities.”

From a technical perspective, “the last two times the 50-day moving average crossed below the 100-moving average, the 10-year rate fell by more than 170 basis points (from November 2018 to August 2019) and 140 basis points (from January to August 2020),” Delis wrote in an email to MarketWatch on Thursday. “While I am not the firmest believer in technicals, when many market participants believe it, it can become a self full-filling prophesy.”

What’s more, Delis says, yields are stuck in a 30-year downward trend exacerbated by a “very strong disinflationary environment”–which is marked by aging demographics; too much debt, which slows down growth; automation; and technology.

/zigman2/quotes/211347051/realtime
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullett Prebon
1.34
-0.03 -2.17%
Volume: 0.00
Sept. 20, 2021 4:56a
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/zigman2/quotes/211347052/realtime
add Add to watchlist BX:TMUBMUSD30Y
BX : Tullett Prebon
1.87
-0.03 -1.77%
Volume: 0.00
Sept. 20, 2021 4:55a
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