US 10-year bond yield at a 40-year resistance level
Premium- If the yield breaks 2.90%-3% and sustains, which will be the multi-year breakout, it will certainly put pressure on equities.
US 10-year bond yields rallied over 100% from 1.127% to 2.417% in last 7 months in anticipation of rate hike.
In the recent Fed meet, Jerome Powel hiked the rate for the first time since 2018.
Since 1981, the US 10 year bond yield has been trending with lower high - lower low structure which is bearish as per Dow Theory.
The yield is now approaching the 40 years falling trendline resistance which is placed at 2.90%.
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Generally, rising bond yields have an inverse correlation with equities but that has not been the case in the recently. Both equities and yields are rising.
If the yield breaks 2.90%-3% and sustains, which will be the multi-year breakout, it will certainly put pressure on equities.
But, if the yield reverses, equities will rise at faster pace as they are already trending bullish.
The S&P 500 (SPX) was under pressure in the last few weeks. But it closed above its long-term moving average (200 days) yesterday. It means that bulls are back on Wall Street.
And that bodes well for the Indian market too.
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Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
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