The US 10-year yield is testing a “critical level” singled out by bond guru Jeff Gundlach on Friday. Selling amid a quiet holiday session has the benchmark yield up 3 basis points at 2.33%.
“US 10-year yield above 200-day moving average, broke downtrendline from March. Critical level now 2.32%, probably coincides with 0.50% Bund,” Gundlach tweeted on Friday.
On June 14, the Federal Reserve lifted its benchmark interest rate for the fourth time since the financial crisis. Since then, the benchmark 10-year yield has climbed about 20 basis points to its highest level since the middle of May.
Selling has been exacerbated by recent comments from European Central Bank head Mario Draghi, who has taken a more positive stance on the European economy. Speaking at the ECB’s annual forum in Portugal, Draghi said that “deflationary forces had been replaced by reflationary ones.”
While Gundlach did not give a prediction for the 10-year, in a follow up tweet he said, “Outside week for US 10-year yield. Lower low than last week’s hit intraday Monday, then higher highs each day ending in weak close. Bearish!”