BY: MATTHEW GRAHAM
The short answer is “to 10yr yields below 2.66% and ideally below 2.49%.” Those are the levels we’d need to see in order to suggest a more substantial move lower in rates. Unfortunately, the more germane questions involve rates on the other end of the spectrum.
The first of those questions would be “how high would rates need to go before bond buyers show up in full force to push rates back down?” No one can say for sure, but the most popular bet is that 3.0% in 10yr yields would do what it did back in 2013/2014, or at least it would try! Technical levels are tricky though. Just because they’re important doesn’t mean they will necessarily do what they’ve done in the past. Rather than view 3.0% as some unbreakable ceiling, look at it as an important ceiling that–if broken–would signify more pain ahead.
Hopefully we don’t end up finding out what will happen at yields of 3.0% today and can instead focus on the second germane question: “What levels would we like to see hold in the short term to suggest we have a chance to stabilize?” The fact that we saw the same intraday highs of 2.885 both yesterday and Monday makes that level an easy call for a “ceiling we’d like to see hold its ground.” Even before that, there’s an intermediate pivot point at 2.864, but yields may have already broken above there by the time you read this!