This would be a 2% move from today level and may well happen
swiftly. Expect renewed talks of default/renegotiation etc if this happens.
Unnoticed by most people, yields have finally managed to
break this down sloping trendline (red circle, Chart1), reached 5% and
have been drifting down since while staying above the dashed line.
If we zoom in these last 9 months (chart2), we can identify
a potential reverse head and shoulders, which is a very reliable reversal
pattern. Moreover, the right shoulder is now forming a falling wedge, which is
another reversal pattern.
A break of the wedge on the upside (should be somewhere
around the 4.5% level) would increase significantly the possibility of a move
to 5% where we have the neckline. A break of the neckline would complete the
reverse H&S and point to a swift move to 5.5% (first) and 6%-6.2% later as
final objective.
Chart1
