Rising Short-Term Interest Rates

Money goes to where its  treated  best.  In  the US since early 2020 with extremely low interest rates/yields on US Treasury bonds/notes,  the stock market has  offered the best place for investment capital.   Stocks could soon have competition in the form of rising  interest rates.  At some point stock fund managers could be motivated to lock in stock profits and place the proceeds into low-risk short-term US government bonds.  The incentive to sell stock is  in relationship to the return on short -term bonds/notes. 

The weekly chart of Treasury Yields – Five Year Bonds (FVX) courtesy of Trading View illustrates the action since 2017.

Since mid – 2020 FVX has been in a bull trend and is  now nearing  prior chart support which could now act as  resistance.  The prior support area is  also near a  Fibonacci .382 retrace of the bear trend from 2018 to 2020.  If FVX can push above the Fibonacci and chart resistance there could be an additional barrier from the bear market correction area – labeled “overhead resistance”  If within the next few weeks FVX can push above these resistance areas  it  could open the door for a powerful move back up to the high made in late 2018. 

If the bull market in interest rates/yields continues it could  provide an  irresistible  lure to sell stocks.

Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

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