Treasury Yield Chart Signals Potential Rate Decline Despite Inflation Concerns

U.S. President Donald Trump has continued to push for lower interest rates despite concerns that inflationary pressures could intensify due to the ongoing Iran conflict and the rapid expansion of artificial intelligence-related investments. However, recent market chart patterns are indicating that short-term interest rates may be poised to move lower. The benchmark two-year U.S. Treasury yield, which closely tracks expectations for Federal Reserve policy, climbed to a 16-month high of 4.201% on Monday as investors increased bets that the Fed might need to raise rates later this year.

Technical analysts, however, point to the formation of a “rising wedge” pattern on the yield chart. This pattern occurs when yields continue to rise within a narrowing range bounded by two upward-sloping trendlines. Traditionally viewed as a bearish signal, the formation suggests that upward momentum is weakening and could eventually lead to a decline in yields. A breakdown below the wedge pattern could potentially push the two-year yield toward the 3.65%–3.75% range.

Further supporting this outlook is the Relative Strength Index (RSI), a momentum indicator that has failed to confirm successive highs in yields since late March. This divergence suggests that buying momentum may be fading. Nevertheless, analysts caution that volatility linked to the Iran conflict could disrupt market expectations. If yields rise above the 4.30%–4.40% range, it would indicate that the current uptrend remains intact. For now, market observers note that the broader downward trend in two-year Treasury yields, which has been in place since October 2023, continues to dominate the outlook.