40-year bull run in jeopardy as 10-year hit resistance

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  • The 40-year-old bond bull market may be running out of steam as interest rates continue to rise.
  • The implications are vast, as higher interest rates often translate into lower stock prices.
  • A chart of the 10-year U.S. Treasury yield features “the most important trend line ever,” Carter Worth said.

According to technical analyst Carter Worth of Worth Charting, the downward trend in 40-year interest rates may be coming to an end as the 10-year U.S. Treasury yield tests resistance against “the uppermost trend line.” important all the time”.

Bond prices rise as interest rates fall, but a period of record inflation and a growing economy,


Federal Reserve

raises interest rates to help calm demand and control inflation.

Now, the widely followed 10-year US Treasury yield is pushing against its 40-year downtrend line that begins with the 1981 peak in interest rates of 15.81%.

“The all-data log chart for 10-year U.S. Treasury yields is the single most important trend line of all time, of all time, in any market,” Braxton said. tweeted Monday. This is so important because whether the 10-year yield rises or is rejected and falls from here will have far-reaching implications for the stock market and the pricing of risk assets in general.

If the 10-year US Treasury yield decisively breaks its 40-year downtrend, it could be seen as the start of a new uptrend, which would mean a continued rise in interest rates and continued pressure on stock prices. But if the 10-year yield is firmly rejected on the downtrend line, one could expect a further decline in interest rates for longer, which could help boost valuations of risky assets. and drive up stock prices.

“It’s the exact same trendline in effect since the 1981 peak, and that line comes into play at 2.81%…how we react to that line really determines a lot. Should we pull back because


recession

kind of things are coming up, or are we really going up significantly,” Worth told CNBC on Monday, adding that he doesn’t think there’s much room left for yields to rise.

If Worth is right in his assessment, that would be a welcome sign for stock investors, who already suffered a more than 10% correction in the S&P 500 earlier this year.

But the 10-year US Treasury yield hit 2.83% on Thursday, which is slightly above the line in the sand that Worth is watching closely. Unless yields quickly stop their upward trajectory, things could get even tougher for the stock market.

The Fed’s plan to raise interest rates by 0.50% in May could be the final nail in the coffin for the 10-year Treasury yield to end its 40-year downtrend and begin a new long-term upward trend, ending a long decade


bull market

in bonds.

10-year US Treasury yield


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