When we last wrote about US Government bonds, we focused on the 10-year yield. It was early-October, 2024, and it was hovering just under 4% at the time. Elliott Wave analyses led us to conclude that a rally to over 5% was on the cards. Currently at 4.41%, we still think that climbing above 5% is just a matter of time. The 30-year US government bond yield, however, seems to be preparing for a bearish reversal already.
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The weekly chart of the US30Y yield, shows an almost complete five-wave impulse to the upside. It began from 0.71% during the Covid-19 panic of March, 2020, and can be labeled I-II-III-IV-V. The five sub-waves of wave III are also visible and marked (1)-(2)-(3)-(4)-(5). Wave (4) of III was an a-b-c-d-e triangle correction, while wave IV was a simple (a)-(b)-(c) zigzag.
What grabs our attention now, however, is that wave V seems to be shaping up as an ending diagonal. Its waves (1)-through-(4) are in place already. Note that waves (1) and (3) are clearly three-wave structures, marked a-b-c, just as they should in an ending diagonal. The contracting shape of the pattern is unmistakable. If this count is correct, the only missing piece is wave (5) of V, which can lift the US30Y yield to 5.30%.
Then, the entire impulsive uptrend from 0.71% would be complete. According to the Elliott Wave theory, a three-wave correction should follow and likely erase all of wave V, and then some. A drop to at least 3.50% would make sense. Those looking for a cheaper mortgage may finally get it in 2026 or 2027.
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