10-Year Yield Near Key Levels Now

In a May 14 post, we pointed out a breakdown in the 10-Year Treasury Yields below 2.60%. Although, as we stated in the post, the next significant level of potential support was not too far below, at 2.49-2.50%. However, a break of that level opened up the 10-Year to a drop down to about 2.18%.

After a brief 3-day dip below in May, the 2.49% area held for the next few months. However, in August, that level got chipped away and, as we mentioned, it opened up the door to the 2.18% level. After a bounce the first half of September, the 10-Year has broken down, reaching near that 2.18% area today (the low on the day as of right now is 2.19%). This area represents important support due to the following factors:

• the 61.8% Fibonacci Retracement of the 2013-2014 rally (~2.16%)
• the acceleration of the “Taper Tantrum” burst in June 2013 that saw yields jump about 50 bps in a week.

Should this level fail to hold, the next line of support lies around 2.03% based on these factors:

• the 61.8% Fibonacci Retracement of the 2012-2014 rally (~2.03%)
• the breakout to 14-month highs during the “Taper Tantrum” in June 2013 (~2.03%)

Failure there would open up 10-Year Yields to new all-time lows. We are a long way from that, though (although perhaps the 30-Year Yield is starting a move towards there now). One practical takeaway is that this probably isn’t a terrible time to lock in a mortgage rate or refinance a loan – that is, if you have better credit than Ban Bernanke.

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