30-Year Bond Yield Tallies First ‘Death Cross’ in 14 Months. What to Do Now.

Generally speaking, lower bond yields are favorable for stocks. Above, a scene at the New York Stock Exchange. (NYSE)

Key Points

• The 30-year Treasury yield formed a “death cross,” where its 50-day average fell below its 200-day average.
• Historically, the 30-year yield has ended lower 70% of the time one, two, and three months after a death cross.
• This pattern suggests a potential shift to lower yields, which benefits existing bondholders through higher prices.

The yield on 30-year Treasury debt has formed a “death cross,” a signal to consider buying longer-term bonds.

A death cross is a trading term for when a shorter-term moving average falls below a longer-term moving average. In this instance, the average yield for the 30-year bond over 50 days crossed below its 200-day average on Thursday and continued lower on Friday.

The bond market is closed today. It was the first time in a bit more than 14 months, since July 31, 2024, that a death cross has formed, based on Tradeweb data.

Like many other technical indicators, a death cross isn’t a guarantee of an outcome, but rather a signal of a shift in momentum. In an environment where yields are trending higher, the short-term average yield typically sits above the longer-term average. The recent crossover suggests that the upward push in yield has stalled and then reversed itself.

Lower yields are good news for existing bondholders because yields and prices move in opposite directions, so a decline in yields means higher prices. Falling yields also suggest increased demand for safe assets like longer-term bonds.

History says more good news lies ahead. Since 1973, the 30-year yield has ended lower 70% of the times in the month, two months, and three months following the formation of a death cross, according to the Dow Jones Market Data team. There have now been 38 instances of a death- cross pattern, meaning it has happened about once about every 16 months.

Created with Highcharts 9.0.1Death Cross Is Here AgainThe shorter-term moving average for the 30-year yield has fallen below the longer-term​average.Sources: Tradeweb, Dow Jones Market Data

Created with Highcharts 9.0.1Feb. 2024'253.84.04.24.44.64.85.05.2%50-day MA200-day MA30-year yield

Paul Ciana, global chief technical strategist at Bank of America, said the data point to lower yields by late November or early December.

According to his calculations, in the past, the 30-year yield has ended up lower 67% to 71% of the time about 30 to 45 trading days, or six to nine weeks, after a death cross. The yield was lower 63% of the time 15 to 25 trading days, or three to five weeks later.

“This is why our asset allocation shifted from cash to bonds last summer…extend duration in bearish yield trend. ” wrote Jeffrey deGraaf, CEO and technical analyst at Renaissance Macro Research. Duration is a measure of a bond’s sensitivity to changes in interest rates; prices of longer-dated debt tend to move more when rates rise or fall.

The bottom line? This may be a good time to allocate more money than usual to long-term bonds.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com