The 10-Year Treasury Yield
Click to Enlarge Global equities aren’t the only asset class at key support. The selloff in higher-risk assets has fueled a flight to quality into Treasuries, driving yields down to levels last seen in autumn 2013.
The 10-year, for its part, put in a double-top near the 3% level and is now hanging precariously above both its 200-day moving average and a key support line. Note that the 10-year yield traded above its 200-day MA for most of 2013 — a period that also brought a 32% gain in U.S. equities.
As a result, a break below the 200-day MA here would signal an important shift toward an environment of slower-growth expectations, greater investor risk aversion and — possibly — renewed inflows into bond funds. What’s more, falling Treasury yields signal demand for dollar-based assets. This is potentially (but not definitively) a sign of continued outflows from emerging-market currencies.
The 10-year is often one of the best barometers for market conditions, and that’s even more true today given its close proximity to important support levels.