In our comparison chart of the Spanish, German and U.S. 10-year Yield, we see that downward pressure on Bund yield persists, owing to a flight to safety from the Euro-zone periphery into German paper. Bund yield has violated a multi-month support area, which projects a target of 1.25%.

My hunch is that the yield pattern breakdown in the German Bund is foretelling a similar developing yield pattern breakdown in U.S. 10-year Treasury Yield. Treasury yield is also under pressure because of relative flight to safety issues, as well as because of what appears to be a softening of global economic growth recently.

If U.S. Treasury yield breaks and sustains beneath support at 1.87%, the pattern argues for downside acceleration that should revisit the September 23 yield low at 1.68% on the way to 1.40% next. ETF traders may want to watch the iShares Barclays 20+ Year Treas Bond (TLT) and the ultrashort TBT.

My suspicion is that such a scenario will coincide with, and/or will be triggered by potentially acute weakness in U.S. and global equity indices.

By Mike Paulenoff

Mike Paulenoff is author of MPTrader.com (www.mptrader.com), a real-time diary of his technical analysis and trading alerts on ETFs covering metals, energy, equity indices, currencies, Treasuries, and specific industries and international regions.

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