Looking to the Futures
10-Year Yield Rises with Oil
Stock indices sell off as treasury yields rise amid geopolitical turmoil which may raise inflation expectations. The June 10-year treasury note futures settled at 110’055 during Thursday’s trading session, down 23 ticks from previous settlement.
The 10-year treasury yield is sitting ~4.46% as it has been rising against the uncertainty of the outcome in the conflict between the United States and Iran. In Friday’s Stock Market Update, Joe Mazzola, Charles Schwab’s Head Trading & Derivatives Strategist stated, “Soft demand at Treasury auctions all this month suggests participants want higher yields to take on U.S. debt, possibly due to anticipated war costs that threaten to raise a U.S. debt approaching $40 trillion.”
Oil prices, which raises inflation expectations, have been increasing with Brent crude futures settling at $101.89/barrel and WTI crude futures settling at $94.48/barrel. Military activity by both nations has created a bottleneck in the Strait of Hormuz, of which ~1/5th of the global oil supply passes through.
President Trump has stated his administration is in peace talks with an Iranian delegation, however the government of Iran has denied such talks are taking place. Iran has said they intend to cause as much economic pain on the US as possible by sending oil to $200/barrel.
Weekly jobless claims report came in at expectation with unemployment claims rising by 5,000 to 210,000.
The US Mar Kansas City Fed manufacturing activity survey unexpectedly rose by 6 to a 3.5-year high of 11.
Consumer Sentiment came in at 53.3, below expectations of 54.3. The previous reading was 55.5.
Technicals
The 10-year treasury futures are in a solid bearish trend.
The 10-year future is trading below the 50- and 200-day simple moving averages. The 50-day SMA crossed below the 200-day on Monday as the price continued lower. The 50-day SMA is at 112’030 and the 200-day SMA is at 112’080.
The 14-day RSI closed at 33.41% and is approaching the 30% oversold threshold.
The directional movement index indicates a strong bearish trend with the ADX being elevated at 34. The negative directional index is also elevated, near the ADX, at 32, which dictates the bearish trend, while the positive directional index sits at 9.
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