Long-Term Treasury Yield Surges: Key Sectors To Be Impacted
Trading.biz analyst Rahul Nambiampurath delved deeper into the long and short-term Treasury yields, only to see the 10-year yield surging to 4.21%. The rise in the long-term treasury yield can lead to higher borrowing costs, which isn’t aligned with the market’s expectation of upcoming interest rate cuts.
While most analysts are viewing this as a negative development, Rahul mentions the following:
“Another way of looking at the 10-year Treasury Yield surge is to consider it a sign of increasing investor confidence”.
“With the economy looking stronger, the rate cuts might happen earlier than expected,” believes Rahul. However, if the long-term treasury yield keeps increasing significantly, it might kickstart the inflation-related discussions, which might then delay the rate cuts.
WHICH SECTORS CAN BE POSITIVELY IMPACTED IN THE SHORT TERM?
The increase in the 10-year treasury yield, as depicted by the US10Y chart, clearly hints at a divergence between the Fed communications and the market expectations. However, Rahul believes that the increase is more of a short-term phenomenon, with the market trying to adjust to the changing economic waves.
US10Y Chart: TradingView
Despite the short-term repercussions, Rahul has identified a few key sectors that might become more tradable until the yield surge cools.
When it comes to the bullish space, Rahul has his eyes set on the following players:
Each mentioned banking stock has charted a minimum year-to-date hike of 11%, reiterating the analyst’s short-term “Buy” stance.
JPM: A VALUE BUYING OPTION YET?
JPMorgan Chase (JPM) is trading at $199.52, up almost 16% in 2024. Even though JPM is on an uptrend, buyers might be able to enter at low levels, all thanks to the relative strength index indicator signifying a bearish divergence.
JPMorgan Chase (JPM) daily chart: TradingView
Even though JPM trades inside a bullish ascending triangle pattern, the bearish RSI can lead to a momentary correction. If the prices dip below the lower trendline, JPM might correct up to $184, which could be a key buying level.
Wells Fargo and Company continues to maintain an overweight target for JPM, setting a price target between $200 and $220, which aligns with Rahul’s short-term expectations.
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