We’ve heard some very different predictions for the direction of interest rates over the past few days. Just yesterday, Citigroup said that they expect the yield on the 10yr note to decline down to the 1.25% level next year…while bond guru, Jeff Gundlach, said he is looking for the yield to rise to 2.1%.
Right now the yield on the U.S. 10yr note is very close to testing a key resistance level. 1.9% was the high in both September and November, so if it can break above that level…and hold above it for more than a day or two (which it wasn’t able to do in November)…it will confirm a change in trend in long-term yields from a declining one over the past 12 months to a rising one.
If it can break (and hold) above that level, it should help the banks rally further, but should also make the utility stock quite vulnerable......To see why we think the odds are better than they were in previous months that a break above that key resistance level...and to see the charts on the 10yr yield, the KBE and XLU, please click here to subscribe to my newsletter, "The Maley Report" (TheMaleyReport.com).
Matthew J. Maley
Chief Market Strategist
Miller Tabak + Co., LLC
Founder, The Maley Report
275 Grove St. Suite 2-400
Newton, MA 02466
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