LIVE MARKETS-Benchmark Treasury yield cruising above the cloud

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BENCHMARK TREASURY YIELD CRUISING ABOVE THE CLOUD

U.S. Treasury yields fell on Tuesday as a well-received auction of the benchmark 10-year note suggested demand for Treasuries remained intact.

Market participants looked to the 10-year note auction as a litmus test of overall demand for U.S. assets, especially from overseas. Amid the tariff shock introduced by the Trump administration last month, analysts had speculated that perhaps foreign investors have started to shun U.S. fixed-income assets.

The U.S. 10-year yield US10YT=RR ended Tuesday at 4.3080%. Now on Wednesday, as investors await the results of the Fed's two-day policy meeting at 2 p.m. ET/1800 GMT, the yield is little changed.

According to the CME's FedWatch Tool, no change in rates is expected today. However, the market is biased for the next cut to occur in July. Interest rate probabilities are pricing in a total of 78 basis points of cuts through year-end.

Meanwhile, traders are watching yield support at the upper boundary of the weekly Ichimoku Cloud, which now resides around 4.16%, the March low at 4.106%, and the lower Cloud boundary, which is now around 4.08%:

The weekly Cloud is thinning, which may minimize its significance. However, last week, after dipping into the Cloud, with a 4.124% low, the yield then quickly climbed to end the week back over 4.30%.

Maintaining altitude above the Cloud can suggest the yield may be poised to resume a more sustained advance, with the late-March high at 4.40%, the late-April high at 4.438%, and the upper daily cloud boundary now around 4.45%, the next hurdles.

If the yield moves back above this zone, it could clear the way to the 4.592% April high. The February high was at 4.66%, and the weekly resistance line from the October 2023 peak is now around 4.76%.

That said, if the yield finishes below the 4.16%-4.08% zone on Friday, it would suggest a fall to the early April low at 3.86%, and the support line from the April 2023 trough, which is now around 3.75% as the next big tests.

(Terence Gabriel)

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