Treasury Two-Year Yield to Hold Above 1%: Technical Analysis

By Wes Goodman

Aug. 26 (Bloomberg) -- Treasury two-year yields will have a tough time pushing below 1 percent, a technical chart signals.

A Fibonacci graph based on the yield shows 0.99 percent represents a 23.6 percent retracement of a decline that started June 8 and ended July 13. The rate fell below that level last week yet failed to stay there.

Two-year yields were little changed today at 1.07 percent as of 12 p.m. in Tokyo, falling from 1.43 percent on June 8, which was this year’s high. The chart indicates yields would only extend their decline if they hold below 0.99 percent. Using the Fibonacci sequence, a break of one level signals a move to the next, and a failure indicates the trend is stalling.

“The yield level is too low,” said Tsutomu Komiya, who helps oversee the equivalent of $103.2 billion as an investor in Tokyo at Daiwa Asset Management Co., part of Japan’s second- largest brokerage. “It’s less attractive to investors.”

Fibonacci analysis is based on a formula developed by 13th century mathematician Leonardo da Pisa, known to his friends as Fibonacci, who discovered the sequence while studying the reproduction rate of rabbits.

In financial markets, analysts use the indicator to determine levels where buy and sell orders may be clustered. The next level for two-year yields is 1.98 percent if they keep rising, based on the chart.

To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.