It could be time to start buying the dip on Treasury yields

As the Federal Reserve meets to decide on its next monetary policy move, is recent economic data hinting at fresh buying opportunities in Treasury yields (^TYX, ^TNX, ^FVX)?

Bank of America Chief Technical Strategist Paul Ciana joins Yahoo Finance's Morning Brief in-studio to discuss projections for US treasuries based around market volatility and the Fed's own interest rate agenda.

"Short-term technical patterns are always developing which could indicate a move back up to 4.75, maybe approaching 5%. And what I love about that actually happening is then we would be able to form a big top in the 10-year yield chart, which we don't have yet," Ciana explains. "But I think if we just kind of look through the forest for the trees kind of bias and technicals, here is if we're up around 4.60 or so in the ten-year, we should be nibbling long. If we're retesting the year-to-date high in ten-year yields of 4.74%, we should be buying. If we're above that, we should be loading the boat long..."

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Luke Carberry Mogan.

Video Transcript

As investors await more guidance from the Fed on Wednesday in their meeting.

Once that press conference happens, every piece of data will be evaluated for hints about the path of the Fed moving forward here for our next guest.

He's arguing that there are clues within the data that indicate buying opportunities this summer for more.

We welcome in Falciani.

Who is the Bank of America chief, technical strategist.

Great to have you here and see, thank you.

Great to be here.

Absolutely so first and foremost.

I mean, investors are just looking for signs right now.

Are there kind of glaring signals right now that that are telling us that there are buying opportunities that could be had this summer?

I think there definitely are.

Look, you know, from a technical lens, you know, we're less worried about, uh, the headlines and and the macro and and the issues at hand because Price tells the truth.

And when we look at charts of like the 10 year yield, for example, and we practise some of our typical you know, trend following methods, we believe with a strong conviction that last year in October, 10 year yield peaked at 5% and we've begun a cyclical bull market in US Treasuries, Uh, we saw a 10 year yield slide from 5% to about 3.

78 last, uh, ending last year.

And they've risen back to about 4.

75 this year.

So we think that point of this year, just before Memorial Day, was actually the peak and 10 year yields likely for the year.

And we're gonna buy the dip markets for the next corrective leg lower in yields.

So where do you see the yield going to?

Obviously, there's been some volatility.

We saw a 14 basis point jump after that hot jobs report down about two basis points.

Now, could we get 5% this year?

Or or do you see that as sort of Yeah.

You know, short term technical patterns are always developing, which could indicate, uh, move back up to 475 maybe approaching 5%.

And what I love about that actually happening is then we would be able to form a big top in the 10 year yield chart, which we don't have yet, but I think if we just kind of look through the you know, forest for the trees.

Kind of bias and technicals Here is if we're up around 4, 60 or so in the 10 year, we should be nibbling long.

If we're retesting the year to date high in 10 year yield of 4.74% we should be buying.

If we're above that, we should be loading the boat long because the second half of this year and our technical methods look much different than the first.

I I'll be honest with you.

One of the questions that I get over the course of the weekend from time to time from a few friends, uh, who are good viewers of the show, they ask.

All right, what is the strength of the dollar right now?

Especially in correlation to what we're seeing in the jobs economy, even, you know, how do you kind of run that correlation?

So two things on that one interest rate differentials are certainly driving FX markets a little crazy.

Uh, especially as more kind of macro geopolitical headlines get into the mix.

Um, so you know that stuff kind of aside, which is a little bit harder to forecast.

I think the jobs market in a way is a lay up for technicals because it does represent a lot of the basic methods that technicians tend to use.

And I think the unemployment rate isn't a great example of that, you know.

More recently, the US unemployment rate reached a two year new high right, a two year new high in the US unemployment rate.

That's the worst labour market in two years.

Now.

Labour market is by all means not bad right now, right?

It's a It's a pretty strong labour market out there, but we're trending in the wrong direction.

So here's a chart of the US labour market double bottoming in, uh, the middle of last year now at a, uh, four higher highs and three higher lows.

Right?

That's the basic definition of a technical uptrend, which, to me, means the labour market is potentially on the cusp of weakening more than priced.

So do you think the markets are under pricing a potential hard landing moving forward?

Yes, I do.

That doesn't mean I'm calling for a hard landing, but based on how markets are priced, they're essentially priced soft landing.

Maybe no landing and hard landing is basically zero right.

So there's a saying in markets hedge when you don't need to.

Um now might be a decent time to think about that.

All right, Well, hopefully that doesn't come to fruition, Paul, but thank you so much.

Paul Zion of Bank of America, Chief.

Technical strategist.

Appreciate your insight.

Pleasure to be here.