Yields May Be At or Near Their Peak
Introduction
Bond yields may be near their peak or may have already peaked. If so, and the path of least resistance is down, there are ramifications.
Generally, yields have appreciated off the narrative that the Fed will keep yields "higher for longer" in their battle against inflation. The US10Y traded at a year-to-date low of 3.25% at the beginning of April and ran rampant to over 5% by October, before pulling back since then to trade near 4.88%.
Daily Negative Divergence
Source: www.tradingview.com
Technically, the US 10-year yield, on the daily chart, is showing a negative divergence. This suggests that the upwards momentum in yields is waning. This makes sense when we consider the US 10-year yield's weekly chart.
Weekly Overbought Condition
Source: www.tradingview.com
The US 10-year weekly chart shows that the RSI is above 80 (green rectangle). This is considered an overbought condition and likely places a ceiling on the yield until the overbought condition normalises. Thus, the negative divergence on the daily chart makes sense. I.e., the daily momentum is showing signs of slowing because on a broader basis there is potentially limited upside for the 10- year yield.
Bond Value
At this stage, and after a savage selloff, bonds have potential value. If they are attractive at current levels, demand will foster price increases which in turn will pressure yields. One metric that suggests value is the real US 10-year yield, which is around 2.48%. I.e., the yield is almost 2.5% above the average inflation that is expected over the next 10-years. It has not been this high since December 2008 and is certainly compelling at current levels to bond investors.
Image by Gerd Altmann from Pixabay
Russell Shor
Senior Market Strategist
Russell Shor is a Senior Market Strategist at FXCM, having been promoted to the role in 2025 in recognition of his depth of insight and consistent delivery of high-impact market analysis. He originally joined FXCM in October 2017 as a Senior Market Specialist.
Russell holds an Honours Degree in Economics from the University of South Africa, is a certified FMVA®, and a full member of the Society of Technical Analysts (UK). With over 20 years of experience in financial markets, his work is renowned for its clarity, precision, and strategic value across asset classes.
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