LIVE MARKETS-Rising benchmark Treasury yield signals potential breakout as Iran war drives volatility

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RISING BENCHMARK TREASURY YIELD SIGNALS POTENTIAL BREAKOUT AS IRAN WAR DRIVES VOLATILITY

The yield on the benchmark 10-year U.S. Treasury is rising to its highest level since July on Friday as markets grapple with the fallout of the Iran war, after U.S. President Donald Trump's extension of a key deadline failed to soothe energy prices.

The U.S. 10-year Treasury yield US10YT=RR is now around 4.46%, up around 4 basis points (bps) on the day, and it's jumped around 50 bps since the U.S.-Israeli war on Iran began.

Meanwhile, traders are noting that monthly Bollinger Bandwidth, a historical volatility measure, is on pace to tick up for a second straight month. This measure ended January at a more than 18-year low.

Compressed Bandwidth is directionally agnostic; however, it does suggest a market that is ripe for much more spirited action, if not its next trend. Indeed, given that low volatility can be a forecast for higher volatility, traders have been on guard, as a range resolution could quickly take on a life of its own.

For example, from that monthly Bandwidth low in September 2007, the yield collapsed around 130 bps (from 4.5944% to a low of 3.285%) into January 2008, or in less than four months.

In terms of the yield's next levels, the July 2025 and June 2025 highs were at 4.495% and 4.518%.

The resistance line from the October 2023 high is now around 4.60%, the upper monthly Bollinger Band is now around 4.61%, and the May 2025 high was at 4.629%.

Thus, a thrust above 4.629% will have the potential to trigger an even more explosive move higher with the next levels at the 4.809% January 2025 high and the October 2023 peak at 5.021%. The January 2007 high was 5.333%.

On a stalled move higher, and a sudden reversal, initial support is at 4.313%-4.299%.

The yield will need to break below the 20-month moving average, which is now around 4.21%, to suggest pressure is truly flipping back to the downside, to once again threaten the lower bounds of the contracting multi-year range.

(Terence Gabriel)

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