Fascinating to see that as the Chinese authorities grapple to control the shadow banking system benchmark government bond yields of all maturities to 10 years yield 3.5 per cent; only the 30-year at 3.9 per cent stands out. Rarely in the past 15 years has the yield curve been this flat and brings with it the potential for it to turn negative. The rebound in yields we have seen this year seems to have peaked in May, benchmark 10-year against 50 per cent retracement resistance with a little triple top. Next week watch for a break below trend-line support turning moving averages negative and triggering a break below the thin Ichimoku cloud. Below 3.4 targets 3 to 3.15.

Nicole Elliott is a technical analyst