The yield on ten-year Treasury Notes broke primary support at 2.00%, plunging to a low of 1.86% in the morning before recovering to 2.10% at the close. Expect strong support at 2.00*. 13-Week Twiggs Momentum (below zero) has been warning of a primary down-trend for some time. Recovery above 2.30 is unlikely at present.
* Target calculation: 2.30 – ( 2.60 – 2.30 ) = 2.00
Falling inflation expectations are behind the drop, with the 5-year inflation breakeven rate — 5-year treasury yields minus the 5-year TIPS rate — making a new 2-year low.
A falling dollar suggests that domestic purchases are driving the surge in Treasury prices, rather than international buyers. The Dollar Index is testing its new support level at 84.50. Respect would confirm a primary advance with a target of 89*. Rising 13-week Twiggs Momentum continues to indicate a healthy (primary) up-trend. Failure of support at 84.50 is unlikely, but breach of the secondary trendline would warn of a correction to the primary (trendline).
* Target calculation: 84 + ( 84 – 79 ) = 89.00
Low interest rates strengthen demand for gold as they reduce the carrying cost.