As Chinese authorities grapple with ways to stem yuan outflows, interbank money market rates in Hong Kong and the mainland soared over the end of last year. Bond prices were hit, too, where yields on benchmark 10-year paper rallied from a record-low 2.6 per cent to 3.4 per cent in thin Christmas markets. Retracing a Fibonacci 38 per cent of the decline in their interest rates since 2013, the move stopped as suddenly as it started as trend channel resistance was met. Also helping to cap the back up was the lagging line, which hit the top of the Ichimoku cloud of 26 weeks ago. We expect moving averages to switch to bearish this month as yields drift back down to retest the lows.
