With the recent rise in bond yields, everyone seems to want to know if we are done yet, or can we march higher?
While no one has a crystal ball, we can use past moves as a bit of an indicator as to the future moves. 4.00% is a big number on the Canadian 5 year bond. This mark has become the resistance level. If the yield cannot break through, and settle above 4.00%, then it may fail to go higher at all. In the last 3 months we have witnessed the yield climb right up to the 4.00% range, and then fall within the next trading day, if not within hours. We are now sitting almost right no 4.00%, and have been for the last 3 trading days or so – yet we cannot seem to break above.
As of right now the bond yield looks to be putting in a ” triple top “, and if we cannot break 4.00% decisively, then lower yields should be on the horizon. Whenever an asset class fails to break through a resistance level 3 times in as many month, then it generally tends to trend lower. While the bond yield has spent a few hours over the 4.00% top, it has not closed for any length of time there. Yields have been on a tear for the last 17 months, but this triple top means they could be running out of steam. Of course, if the yield on the 5 year Canadian bond can break 4.00%, hold over 4.00% for at least a session or two, then we could be looking at much higher yields. If we break through 4.00%, then 4.40% looks pretty easy to hit. Economic data due out in the next 2 weeks will help give the yield some direction, and we should start to see a movement one way or the other in that timeframe.
Ryan Sims insights, analysis and thoughts 
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