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Before embarking on a projection, I'd like to remind you of a few contextual elements to help you understand the general framework in which the markets are currently evolving. The narrative that has been unfolding for months is built around four pillars: artificial intelligence will revolutionize the world and generate huge profits for those who know how to take advantage of it, inflation has begun its normalization phase and a return to the 2% mark is expected by the end of the first quarter of 2024. As a result, the Fed is set to lower its key interest rates in March, allowing the US economy to land softly and avoid the recession we've been talking so much about since 2022. So much for context.
Each new statistic is therefore scrutinized and put into perspective with these 4 pillars in order to detect any potential erosion. So it is with CPI indices, the unemployment rate, the number of job creations and so on. Now that the picture has been painted, let's move on to the delicate exercise of anticipation.
A little foresight, for God's sake!
Over the long term, in monthly terms, the US 10-year yield confirmed in 2022 the end of a downward trend that began in the early 1980s. This paradigm shift is evidenced by the exit from a downtrend channel at the top, and by the upward crossing of the 144-month moving average (in yellow), currently hovering around 2.23%.
Source : Bloomberg
Source: Bloomberg
On a shorter timeframe, the 10-year is currently testing its 55-week moving average around 3.85%, while the RSI is at the juncture of horizontal support at 47 and the lower limit of a downtrend channel in progress since 2022. At this stage, the most likely scenario would be a holding intermediate rebound on these levels towards 4.60%, before starting a new downward salvo towards 3.26% or even 2.76/67%.
Possible alternatives
Given that forecasting is far from an exact science (!), it's important to work out a few alternative scenarios too, so as not to be caught off guard if the central scenario starts to falter.
So as not to clutter your mind too much, I'll just mention two alternative scenarios. The first is a more bullish case. Instead of simply bouncing back towards 4.60%, the market would break above this level, paving the way for a continuation of the uptrend towards 5.27/5.32% (the level at which profit-taking would be expected).
The second scenario, on the other hand, is directly bearish. Instead of rebounding, the US 10-year would remain below 4.07% and continue its decline towards 3.26%, the level at which it would materialize a rebound of several months.
