Technically, 10y Bund yields look trapped in a range of roughly 3.20-3.40%, a range where they spent most of the past months with only short-lived deviations on both sides. 10y US Treasury yields are still trading within a slowly falling donwnward trend channel (see chart). Arguably, Bunds look a bit more bearish than USTs but still do not give a clear sell signal from the technical side.
10y US Treasury yields remain in downward trend channel
Cross-market wise I frequently use the chart below to compare 10y govie yields with the development of equities and commodities. The combination of equity and commodity performance should give a good indication about the changing outlook for real growth as well as inflation and therefore for nominal growth. Given that it is nominal growth which should be the key driver for nominal bond yields, government bonds should exhibit a close correlation to the combined equities and commodities performance.
Government bond yields vs. equities and commodities
10y Bunds have moved back from overly expensive level
Fundamentally, I stick to my shorter-term view. That is, I think that seasonally adjusted data risks coming out rather on the weak side as the typical seasonal strength going into autumn should be rather less pronounced than usual. Friday's employment report confirmed this assessment. While the not-seasonally adjusted payrolls according to the establishment survey increased by 641k, the seasonally adjusted payrolls decreased by 190k, meaning that usually employment in October increases on average by 831k. However, according to the household survey, unadjusted employment increased by only 9k, resulting in a seasonally adjusted decrease of 590k. These numbers are weak. And remember that the establisment survey excludes self-employed as well as the job-losses by business deaths and instead uses a statistical method to account for net business births/deaths which added 86k in jobs during October. Given this method and given my belief that amid the lack of credit availability for small firms, the recession for small firms is far from over, the establishment survey should paint too rosy a picture of the employment situation.
Therefore, in light of all this, I maintain my tactical bullish outlook.