#SA10YGOVYIELDS looking to start a move back to top of range?The South African 10 year bond yield has found support off the intersection of the 200dma and the previous change of polarity point between 9.55%-9.65%. Momentum seems to be shifting up which could see us move back to the top of the range at around 11.16%.
ZA10Y trade ideas
SA10YS. Africa 10 Year Bond Yield (ZA10Y) | As noted in previous research, buyers of SA bonds have taken an interest around the 10.30 to 10.40% range since Q1 2022, with the same occurring during last week. Over the medium term, SA debt is trending lower (i.e. higher yields), with the 2 Std Dev, 200-day linear regression channel moving higher. At current levels, the yield trades just below the mid-point of the range (i.e. the mean) with a close of 10.19% while a print and close above 10.35% would see the bond continue their sell off.
SA 10-Year Bond YieldSA bonds trade at a multi-year high, having broken out of a long term base. At current levels, taking a short term view, the yield on the ZA10Y is strong but 'near overbought' with a 7-day RSI reading of 85 (oversold in fixed terms). I've also noted the yield testing the rising trend line which extends back to the swing highs of both March 2022 and March 2021. A short term retracement toward the prior breakout range of 10.20%-10.24% is possible.
Strap yourself in...SA 10 YR yields are climbing steeply (bond prices falling). Given the backdrop of rising global rates, keep an eye closely to this chart. We have broken the 200 dma and the trend is firmly higher. This will also weigh heavily on the ZAR, and I would expect USDZAR to trade significantly higher as these yields climb. Next stop on the chart is 9.36. You have been warned!
Bounced off strong resistance. Pullback to zones indicated.South African 10Y bonds have bounced off strong resistance. Likely to pull back to zones indicated by arrows.
Under these circumstances, this will be ZAR negative, putting an end(or pause) to the rand's rally since the begging of April.
It is also to be noted that COT positioning among non commercial traders for the ZAR is up by 3000 long and down 2000 short contracts vs last week.
Keep an eye on strong divergences between the 10Y bond and 10y bond yield. This is often(not always) precursor to currency strength or weakness.