I'm the Chief Investment Officer of Nerad + Deppe Wealth Managment, a fee-only Registered Investment Adviser based in sunny San Diego, CA. investing for success over the long term is more than just a pie chart and annual rebalancing.

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TNX: Perpetual Path To Nowhere, or Onward & Upward?

The yield on a United States 10-Year Treasury Bond (TNX) gained 3.95% this week with Friday's close at 2.39%.  TNX has now gained 11.61% over the last two weeks, but remains -9.27% below its 2017 high at 2.615%.  TNX has been trendless for years, in fact TNX has traded at the 2.39% level each and every year since 2010. 

Given how long TNX has been stuck in neutral, the popular question going forward is centered around when TNX can land in drive, or establish a primary uptrend.  Broadly speaking, any uptrend is the result of a series of higher highs and higher lows over a specified time frame. With TNX's high from 2016 at 2.621%, there's absolutely no reason to get excited over an upside jolt for TNX until such jolt places TNX above 2.621%.  

However, TNX's strength the last two weeks may suggest further strength is on the horizon, which means TNX can perhaps make a run at 2016's high over the month ahead.  I've identified all rolling two-week periods where TNX gained 10% or more and closed above its 50 week simple moving average, since 2000.  I've then detailed TNX's forward 4 week returns, and the path TNX traveled by including historical drawup and drawdown statistics.  We can observe 19 historical samples, in which 14 where higher over the forward 2 and 3 weeks (~74%), on average by 3.23% and 3.67%.  Additionally, the median forward 4 week maximum drawup is 8.39%, which would target a potential trade up to 2.593% at some point over the coming month.  That would give TNX a shot at finally clearing 2016's high, which will help open the door to the earliest stages of a potential rising interest rate environment by establishing a second consecutive calendar year with a higher high than the prior year - something that hasn't happened since 2007.  

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