10 & 30 Yr UST Prices Continue to Battle Long-Term Resistance; Analog to Japan Suggests Days of Yield Declines Near an End

The first charts below include 10 and 30 Yr UST prices.

With their strong recent performance, both securities are battling long-term channel resistance dating back 27 years.

Historically, per the red shades, this resistance has resulted in periods of declining bond prices.

Usually, when prices test the top of channel resistance they ultimately go on to decline to test channel support, per the green shades.

As these two assets battle long-term channel resistance, the analog between the decline in 10 Yr rates in Japan from 1989 onward (end of their real estate / equity bubbles) to the decline in 10 Yr rates in the US from 1998 onward (global imbalances become apparent via LTCM, Asian/Russian FX crises), which has trended incredibly close over time, suggests the decline in US rates is near its end stages.

This does not mean that materially higher rates and/or inflation are imminently at hand.  Per the Japanese comparison, it merely suggests that the potential for incremental price appreciation/yield declines in US bonds is deteriorating rapidly, but that moving forward, they both likely face years and years of consolidation around this bottom.

We do note that on a monthly basis, 10 Yr rates in Japan bottomed at ~50 bps in April-June 2003 and then went on to triple to the ~150 bps level a mere two months later.

The Nikkei bottomed around the same time and went on to rally ~45% in six months.

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