Treasuries Flash Bullish Signals After Oil Selloff

Why It Matters

The shift signals potential upside for bond prices and could reshape investors’ expectations for Federal Reserve policy, affecting borrowing costs across the economy.

Key Takeaways

• Oil price fell to $89.41, prompting Treasury bullish gaps.
• 5‑year and 10‑year yields sit within wave‑theory target ranges.
• 30‑year yield broke its target, signaling short‑term bearish stress.
• Fed Funds futures show no cuts this year, possible Dec 2025 hike.
• Weekly charts reveal bullish reversals, especially on the 30‑year note.

Pulse Analysis

The recent plunge in crude oil to $89.41 a barrel has reverberated through the fixed‑income market, lifting Treasury yields into bullish gap territory. Historically, lower energy prices reduce inflation expectations, prompting investors to seek safety in government bonds. This dynamic helped the 5‑year, 10‑year and 30‑year notes open higher, even as the broader market digests the oil sell‑off. Understanding this link is crucial for portfolio managers who balance commodity exposure with sovereign debt allocations.

Technical analysts are applying Elliott Wave theory to gauge the next move in yields. The author’s target ranges—4.162%‑4.124% for the 5‑year and 4.514%‑4.461% for the 10‑year—remain intact, while the 30‑year has breached its upper band, hinting at short‑term bearish stress. Weekly charts, however, display bullish key reversals, especially on the 30‑year, which is flirting with its highest level since 2007. If the yields stay within these bands, bond prices could stabilize, offering a clearer path for investors eyeing duration positioning.

Fed Funds futures add another layer of complexity. The market now prices a near‑certain pause in rate changes for the current year and the next, yet assigns a 42% chance of a rate hike in December 2025. This mixed signal suggests the Federal Reserve may adopt a more cautious stance, balancing inflation concerns against growth risks. For fixed‑income strategists, the confluence of oil price volatility, wave‑based yield targets, and evolving rate expectations creates both risk and opportunity, underscoring the need for agile positioning in Treasury portfolios.