The taper tantrum sparked in Europe managed to do for US yields what economic data and the Federal Reserve were unable to do–steepen the yield curve, explains the analysis team at BBH.
“The two-year yield rose three basis points in the last week of June, while the 10-year yield rose 17 bp. The backing up of the long-end was the most in a week since the first week in March. The yield has entered the 2.30%-2.35% band that may take some time to work through the supply. The September note futures peaked on June 14 and spent the second half of the month moving lower, effectively unwinding what it had gained in the first couple of weeks of June. The 125-08-125-15 area houses retracement objectives and other chart points. Bearish divergences in the technical indicators and the extreme market positioning provides scope for additional declines in prices (higher yields).”