- It is possible that a double bottom formation could be developing here similar to that seen in 1989 (interim low), 1993 (trend turn) and 2003 (trend turn).
- If so, for choice, this looks most like the 1993 pattern around March/April that year.
- It was indeed a trend base then, but the resistance level did not give way until virtually 12 months later in March 1994 (the year of a fixed income bear market). The pivotal point on this potential double bottom is much higher at 3.05%. If we were to eventually see a move towards there we would likely be looking at significant steepening to FED funds (150 basis points or more which would be very similar to that seen as a new tightening cycle began in 1994 and in 2004). By definition it would suggest any eventual tightening cycle could be at least late 2009 or early 2010.
- Below 1.25% would obviously change this dynamic and suggest at least a test of the 2003 low at 1.02% if not lower.
- All this suggests a slight bias that further steepening will continue to need assistance from elevated/higher 10 year yields.
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