Treasury Yields Continue to Climb, Investment Service Stocks Show New Leadership


I've been writing about the upturn in global bond yields, which has boosted Treasury bond yields. Chart 1 shows the 10-Year Treasury Yield trading above 1.70% in today's trading. Foreign yields are bouncing as well. One of the side-effects of rising bond yields is the recent rotation out of bond proxies like staples, telecom, telecom, and REITs and into financials like banks, brokers, and life insurers. My main focus has been on bank stocks that usually benefit from higher bond yields. Over the last month, however, the two strongest financial groups have been life insurers and investment service stocks. And both are doing very well today.

Financial stocks have been market underperformers throughout the seven year bull market in stocks. That's most likely due to the fact the Treasury yields have fallen throughout that period. Since the start of the third quarter, however, financial stocks have started to come alive -- both on an absolute and relative basis. That new interest in financials has also coincided with rising bond yields. The main financial groups are banks, brokers, and insurers. All three have turned up since July and are showing rising relative strength ratios. Along with stronger chart patterns. Chart 2 shows the Dow Jones Investment Services Index ($DJUSSB) trading at the highest level this year. Its price trend shows a bullish pattern of "rising peaks and rising troughs" since February, as well as having cleared a major resistance line extending back to last July. Its 50-day average has also climbed above its 200-day. And its relative strength ratio (top of chart) is rising. Investment service stocks have been the strongest part of the financial sector since midyear. That could be interpreted as a new sign of optimism in the stock market. I'm more inclined to view it as a sign that bond yields have probably bottomed.

John Murphy
About the author: is the Chief Technical Analyst at, a renowned author in the investment field and a former technical analyst for CNBC, and is considered the father of inter-market technical analysis. With over 40 years of market experience, he is the author of numerous popular works including “Technical Analysis of the Financial Markets” and “Trading with Intermarket Analysis”. Before joining StockCharts, John was the technical analyst for CNBC-TV for seven years on the popular show Tech Talk, and has authored three best-selling books on the subject: Technical Analysis of the Financial Markets, Trading with Intermarket Analysis and The Visual Investor. Learn More
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