The bond market is 'sitting on the edge'
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.
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."
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.
Stay tuned.