The interest rate on 10-year U.S. Treasurys isn't heading higher any time soon – in fact it could be ready to sink back to sub-2 percent levels, according to an analyst at Lloyds Commercial Bank.
Tim McCullough, a technical strategist at the bank, has developed a series of charts that represent sentiment in the fixed income sector over a long period of time.
"The charts are telling me that at some point investors will decide that: 'No, yields are heading back lower to 1.80 (percent) or perhaps even lower'," he said, thus wrong-footing many in the industry who believe a spike or slow grind higher for interest rates is the most likely outcome with the U.S. Federal Reserve looking to hike its benchmark rate in the not-too-distant future.
"Beyond that, we could extend lower in terms of Treasury yields but I wouldn't be that aggressive just yet," he said. The comparison he gave was the shape of a human figure, with the last twelve months seeing a definite "head and shoulders" pattern and the right-hand shoulder now starting to form before the sharp drop of an arm.