- Instrument: US10Y
- Average Pattern Move: -6.07%
- Timeframe: June 7 – September 2
- Winning Percentage: 15.79%
Dear Investor,
You may be aware that US 10 year yields have been falling. US Treasury Secretary Scott Bessent’s public and persistent campaign to cap the 10-year yield—via both verbal and concrete measures—has seemingly created a new market mantra: don’t fight the Treasury. With the administration’s attempts to suppress borrowing costs, seasonal forces suggest another move lower for yields in the summer ahead.
We want to analyze the data in more detail.
Policy vs Pattern: Can the ‘Bessent Put’ Override Seasonality?
Scott Bessent has made it clear: lower yields are the goal. Bessent’s actions have helped push yields down in recent months, with 10s falling ~50bps across the curve. Major strategists at Barclays, RBC, and SocGen have responded by slashing their year-end 10y yield forecasts, citing the so-called “Bessent put.”
But the question is: can this ‘put’ combine with seasonal pressures to send yields even lower?
Seasonality shows that bond yields have fallen 16 times in the last 19 years with an average fall of 9.35%. So, does this mean that any rallies higher in US 10 year yields ahead of June are only set to fall this summer? This seasonal window comes with macro uncertainty. If inflation data softens materially, or if recession risks mount sharply, yields may still fall despite historical tendencies. Moreover, if Bessent ramps up quantitative tightening adjustments or surprises the market with even more supply control, that too could cap yields.
Nonetheless, seasonal pressures argue that the path of least resistance for 10-year yields over the summer is lower.
Technical Perspective
From a technical standpoint there is a major support level for yields market at 4.15%. Should this break it would offer a major place for managing risk and setting stops above this level.
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Trade Risks
Yields have already dropped substantially in Q1, so some retracement risk exists. Should inflation re-accelerate or the Fed reassert a hawkish stance, it could cap bond gains. Additionally, if risk assets rally hard, demand for Treasuries may soften.
Nonetheless, history suggests that summer typically brings yield compression, not expansion.
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