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Bond yields spike higher once again, putting pressure on other assets like stocks . Let’s take a quick look at the markets and see where they could potentially go short-term.

10-year & 30-year Treasury Bond Yields

10-yr & 30-yr U.S. Treasury Yields Weekly
10-yr & 30-yr U.S. Treasury Yields Weekly

Bond yields take the headlines once again with the 10-year Treasury note hitting a high at 1.642%, and the 30-year Treasury note hitting a new high at 2.404%. This is likely a reaction to the final passage of the $1.9T U.S. stimulus bill, signed yesterday by U.S. President Joe Biden.

Again, rising bond yields makes the cost to borrow for businesses and households more expensive, raising the odds of a slower recovery, which why we’re seeing a move lower in risk assets like equities.

The question now is will bond yields break above pre-pandemic levels and cause more pressure to risk assets?

U.S. Treasury Bond Futures Weekly

U.S. Treasury Bond Futures Weekly
U.S. Treasury Bond Futures Weekly

Bond prices continue to drop and at the moment, doesn’t seem like previous technical levels will be enough to draw in buyers.

Currently, U.S. Treasury bond futures are testing an area of major interest (around the 156’00 handle), and if yields / inflation is expected to rise further, that could lead to a break lower, draw in more sellers, and keep the sell-off going.

How can forex traders potentially play that shift if it occurs?

USD/CHF Daily

USD/CHF Daily Forex Chart
USD/CHF Daily Forex Chart

Besides checking out bond futures and CFD’s to play the potential scenario above, USD/CHF has a pretty strong technical setup to check out as the Dollar has been a beneficiary to the recent rise in yields.

The pair recently broke above the strong resistance area around the 0.9200 handle. And we’ve already seen a shallow pullback met with buying support, and if the above bond yield scenario plays out, we could see a fresh leg higher, potentially up to the next area of interest around the 0.9600 handle (minor broken support area).

Equity Resistance to Hold?

E-mini S&P 500 and Nasdaq 100 Futures 4-Hour
E-mini S&P 500 and Nasdaq 100 Futures 4-Hour

If this is just the beginning of a new leg lower in bonds / rise in bond yields, the recent resistance in equities may in the midst of a short-term reversal.

Looking at the equity futures above, the S&P is retesting, and potentially failing to break above the previous swing high just under the 4000 major psychological level.

The Nasdaq 100 is fairing much worse during the rise of bond yields, with every bounce serving as a selling opportunity since mid-February.

The market recently swing from a low around 12,300 to trade above 13,000 in yesterday’s session. Is this another opportunity for Equity futures and CFD‘s bears to play the short-term trend lower?

What do you guys think? Are higher bond yields ahead? Are you looking to short bonds and equities / buy the Dollar? Or do you think these levels are perfect to play a counter trend move? 

Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.