5yy (bearish)'wedge' consolidation
'coiled spring' is pent up energy which can/will resolve ... <higher/lower> choose
When you write about the UST market (2x / day), these days between XMAS and NYE are truly a ‘show about nothing’ and with that in mind, fresh off today’s MIXED 5yr auction, a few words and a visual from the sellside,
… it was a modest bear-steepening into the 1pm 5-year auction, where another solid indirect bidder showing stabilized the term-structure (best indirect bid of 65.7% since AUG 2020). While the end-user demand improvement to 80.0% was likely flattered by the reduced size of the issue, the read-across to tomorrow’s pre-month-end 7-year looks to be net positive. For reference, last month’s $59 bln 7-year auction was the strongest of the weekly trio (1bp thru on strongest end-user demand since AUG 2020) after very poorly subscribed 2- and 5-year offerings (that occurred on the same day)…
… 5y yields: px-action since late October is starting to look like a ‘wedge’ consolidation, more bearish than bullish in nature (given higher RSI ratings), but won’t be ‘conclusive’ until we see a meaningful break over 1.31% or below the 1.09% mark. Either way, this ‘coil’ suggests pent up potential energy from which a new trend will likely spring.
I believe this outfit is NOT predisposed to see the charts bearishly as the consensus is but rather, looking at prices (along with other indicators) as instructive in and of themselves. That said, in the above ‘ink-blot’ test I see what they see — energy with a chance to break one way or another BUT lack of any clue which way that will be SO … Being 5yy, they will most likely travel direction of FF (until something else — geopolitical? breaks).
For NOW, though, rates market liquidity set to leave town for the year just after 1pm tomorrow (7yr auction) and can’t wait to see how little transpires overnight, while we’re asleep, AGAIN.
And one more short commentary about what didn’t really take place today in UST markets. This, from BBG
Treasuries End Mixed on Light Volume; 30-Year Tests Trendline
Treasuries ended Tuesday narrowly mixed, little changed out to the 10-year and weaker at the long end, where the 30-year yield rose as much as 3bp, testing its 50-DMA. Monthly 5-year note auction, second of three fixed-rate coupon sales this week, tailed slightly after rallying into the 1pm ET bidding deadline.
Despite little change on day for 2-year yield, its session high 0.75% was YTD high for the tenor as Monday’s offering became the current issue
Tuesday’s $57b 5-year auction was awarded at 1.263% vs 1.259% WI yield at bidding deadline; auction sector briefly pared gain on the follow
Auction performance was better than November’s, which tailed by 1bp following a spate of extreme volatility in the sector that continued through mid-December as Fed policy evolved
Auction cycle concludes Wednesday with $56b 7- year sale
Treasuries rallied before the auction as demand emerged for the 5-year sector after the current issue’s price fell below par on Monday for the first time since Dec. 16
30-year yield rose to session high 1.913%, testing its 50-DMA at 1.910%; yield last exceeded the trendline on Nov. 24 and hasn’t closed above it since Nov. 23; those were the last trading days before the Nov. 26 post-Thanksgiving session when government bond yields collapsed globally in response to the emergence of the omicron variant
Treasury and eurodollar futures and options volumes remained well below average; Treasury futures volume was ~54% of 20-day average, eurodollar options volume was ~40% of average
And without a terminal, this is best I can do, from Investing.com