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Retracement in 5-year Bond Yields

5-Year-Bond-Yields The 5-year bond–which is normally correlated with fixed mortgage rates–has had a massive rally over the prior three months.  Its yield, as always, has moved inversely (down in this case).

Now, technical analysts are likely looking at the chart above and calling for a correction higher.  For those into esoterica, pattern watchers term this a 2B reversal.

To most this is hocus pocus, especially to academia.  We never advise clients based on this kind of stuff.  There is always the possibility or rates collapsing back down and making new lows.

That said, some traders believe strongly in these types of patterns.

(Chart data from the Bank of Canada)


There are fundamentals driving yields higher as well.  Bond expert and host, Hank Cunningham, says "one of the fallouts of the budget will be a record issuance of Federal bonds this year, some $82 billion." Moreover, the US treasury is issuing an astronomical $2.5 trillion worth of its own notes and bonds this year.  New supply typically has an upwards influence on bond yields.