The bond market is 'sitting on the edge'

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Treasurys have been under pressure as of late. After putting in a low of 1.36% on July 8, the benchmark 10-year yield has rallied more than 20 basis points to its current 1.58% as solid economic data and Janet Yellen's hawkish speech at Jackson Hole have traders pricing in the possibility of the next Fed rate hike coming as soon as the September meeting.

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In a note sent out to clients on Wednesday, UBS' Technicals team of Michael Riesner and Marc Müller warn, "US Bonds Are Sitting On the Edge." The duo suggests that 1.63% is the key level to watch on the 10-year yield, and that a breakout above there sets up the potential for a move as high as 2.00%.

But there is more at play here than just a near-term backup in yields. Riesner and Müller believe not only would this break the downtrend in the 10-year yield that has been in place since the beginning of 2015, but it would also be the "ultimate confirmation that a major basing process in US yields is underway."

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However, not everyone agrees. Bond gurus Komal Sri-Kumar and Gary Schilling, who have been far out in front of this bond market rally, believe the 10-year yield is going even lower, setting their sights on 0.90% and 1.00% respectively.

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Stay tuned.

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