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Government bond yields in the US, Canada, and Europe are holding support. If yields breakout, financials and other value stocks could rise relative to growth stocks. Here are some charts we're monitoring at the trading desk.
The 10-year Treasury yield recaptured the 0.60% level from the crisis low in March. Since then, support has held, pushing the yield closer to its 200-day moving average. A definitive break above 0.90 could be the start of a short-term trend reversal.
On a relative basis, financials have yet to recover from the 2008 financial crisis. However, the sector is back near its 2008 crisis low, which could offer support relative to the broader market. Higher yields benefit bank net interest margins.
For our friends up north, Canadian bond yields are also testing the 200-day moving average. Support from the 2020 crisis low remains intact.
Canadian value stocks are holding support relative to growth stocks despite underperforming this year.
Interestingly, Deutsche Bank (a European financial bellwether), is holding support from 2019 levels. The stock appears oversold, with upside potential from here. Of course, all of this depends on the movement in yields.
Dantes Outlook provides strategic portfolio advisory for self-directed investors. We assemble a team of experts to assist clients with both long-term investment needs and short-term trading opportunities, in both up and down markets. We counsel individuals and institutions around the world.
Damanick Dantes, CMT is an independent global macro trader at Dantes Outlook LLC. Previously, he was tasked with curating timely research and expressing global asset allocation views for portfolio managers at Fidelity Investments.