Morning Notes — Yield Curve and SPX Support

Bond yields: Support for 10-year Treasury yields sits in the 1.35%-1.40% zone with sustained levels north of 1.55% confirming a reversal to higher levels. We see some light resistance in the low 1.70s, but look for yields to reach the 1.90-1.95% range sometime in H1’22.

SPX: The S&P 500 (SPX) is now in the ~4545 support range with the 4430-4500 range as much stronger medium-term support.  A test to the middle/lower-end of that range and subsequent sideways consolidation would set the stage for a more-positive long-term view.  We stay positively biased above 4430 in the absence of low-frequency rally deceleration and yield curve inversion.

Curve: Despite last week’s Fed message, the 2/10 year yield spread remains well-above inversion at +78bps.  And the 5/30-year yield spread remains above support at ~65bps, which keeps us open to a return of cyclical sector leadership.