A Super Rally for U.S. Interest Rates? – Part – Two

                       

The 02/02/25 blog “A Super Rally for U.S. Interest Rates?” noted “In the coming months U.S. Treasury yields/rates could have a dramatic rise”.  The dramatic rise may have begun last week.

The weekly U.S. 30 – Year Treasury Bond yield (TYX) chart courtesy of Trading View illustrates the long – term picture.

The bull moves from March 2020 to October 2023 took the form of a clear Elliott – Impulse wave.   The subsequent decline into the September 2024 bottom was a clear Elliott wave – Single Zigzag correction.  In Elliott wave theory the pattern of five up followed by three down implies a move up to at least the five wave peak.

Even if you have no knowledge of Elliott wave patterns, using standard Technical analysis patterns the message is the same.   A steady rise in price followed by a shallow decline and a basing period.  The larger the base – the greater potential price rise. 

The presumed TYX base is large and implies a break above the base could continue for many months.    

Weekly RSI recently crossed above its moving average and is far below the overbought zone which begins at 70.00.  The message from weekly RSI implies considerably higher prices.

The daily TYX chart zooms in on recent action.

The drop almost reached the .618 Fibonacci retracement level of the September 2024 to January 2025 rally. The early April bottom was also around the early December 2024 correction low.

Note the subsequent straight up move.   Three – months of decline was wiped out in one – week!

A case could be made that an important peak was made at the declining trend line connecting the October 2023 and January 2025 tops.  A near-term move above the trend line will likely move above the 01/10/25 and 10/23/23 peaks.  An upside breakthrough could open the door for significantly higher prices.

Daily RSI is below the overbought zone and implies near-term higher prices.

If TYX can move above its 10/23/23 peak at 5.15 it could reach 8.00 sometime in late 2025.

The U.S. FOMC has control over short-term interest rates not long-term rates.  A rise in U.S. long-term interest rates will likely have an adverse effect on the U.S. economy.  Particularly housing and automotive sectors. 

A weakening U.S. economy will most likely depress the U.S. stock market.

If long-term U.S. interest rates have a significant rise, U.S stocks could decline into October or December 2025.