Interest Rates and Oil Prices Weigh Down——4.3% Resistance Line Forms Watershed Before FOMC Meeting

Ahead of the Federal Open Market Committee (FOMC) regular meeting, the U.S. 10-year Treasury yield encountered resistance at the key 4.3% level, with an unclear direction. The market is paying close attention to Iran geopolitical risks and oil price trends, showing signs of adjustment.

■ Resistance at 4.3% Again

Recently, the U.S. 10-year Treasury yield faced resistance and declined at the 4.3% level. This level has been a strong resistance zone confirmed multiple times, and the yield failed to break through it, turning downward. Currently, the yield is moving within a large triangle convergence pattern, and market experts believe that a true directional breakout will still take some time.

■ Volatility Sends Early Signals

Notably, before this sharp rise in yields, bond volatility indices had already signaled an increase. Analysts believe that given the significant volatility in this yield movement, unless the Iran situation worsens further, a short-term correction phase is likely.

■ Oil Prices as the “Anchor” for Yields

Although oil prices have pulled back from panic highs, the market generally believes that as long as oil prices stay high, yields will find it difficult to decline meaningfully. In fact, the correlation between the U.S. 10-year Treasury yield and oil prices remained very high until recently. However, the recent 10-year yield shows signs of decoupling from oil prices, which is attracting market attention.

■ German Bonds Also Face Resistance at 3%

The European bond market shows a similar pattern. The German 10-year government bond yield encountered resistance and declined at the critical 3.0% level. This level coincides with the 2023 high and the upper boundary of the long-term trend channel, and has been unable to break through effectively, leading to another resistance.

■ Market Considerations Before the FOMC Meeting

The FOMC meeting scheduled for the 18th-19th (local time) is highly likely to result in no change to interest rates. Market focus is on Chairman Powell’s tone and the changes in the dot plot (SEP). Given that oil prices remain high, expectations for a policy shift by the Fed may be further delayed. This week, oil price movements have become a key variable influencing the direction of yields.