Treasury Yields to Fall, Fibonacci Signals: Technical Analysis

(Bloomberg) -- Ten-year Treasury yields are likely to decline, paring their biggest weekly increase in more than a month, a technical indicator suggests. Yields may fall to 3.43 percent this week after they failed on July 20 to break above 3.72 percent, a figure that represents a key threshold based on the Fibonacci sequence of numbers, said Kazuaki Oh’e, a bond salesman in Tokyo at Canadian Imperial Bank of Commerce, the nation’s fifth-biggest bank.The 3.72 percent yield marks a 61.8 percent retracement of the decline from an eight-month high of 4 percent on June 11 to a two-month low of 3.26 percent on July 13.

“The yield is likely to fall a bit further this week,” Oh’e said. “It may reach the next support level” of 3.43 percent, which is the 23.6 percent retracement level, he said.The 10-year yield was unchanged at 3.48 percent as of 9:05 a.m. in Tokyo, according to BGCantor Market Data. It fell 12 basis points, or 0.12 percentage point, in New York yesterday.Yields jumped 34 basis points last week, the biggest increase since the five days ended June 5.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break above resistance or below support indicates yields may move to the next stage. Levels used in the analysis are based on a sequence identified in the 13th century by Italian mathematician Leonardo da Pisa.