US treasury yields at the long end posted strong rally overnight. 10-year yield closed up 0.066 at 0.762, hitting the highest level since June.
There were a couple of explanations for the strong move. There appeared to be progress on the prospect of a fresh stimulus deal before election, especially after President Donald Trump contracted the coronavirus himself. Also, some noted that Democratic challenger Joe Biden’s lead is paving the way for bigger government spending, and deficit, after the election.
At the same time, we could also argue Trump’s speedy recovery showed huge progress in coronavirus treatment, which is the single most determinant factor for the economic course onwards. Additionally, Fed officials are clearly in unison to drive inflation overnight in the next couple of years.
In any case, 10-year yield should now be leading 55 day EMA behind while rise from 0.504 resumes. 0.957 resistance would be the next target. Though, we don’t expect a break there any time soon.
