The recent stumble in US economic data raises new questions about the timing of the Fed’s plans for raising interest rates. The earliest forecast for the first round of tightening monetary policy has been pushed up to September, although some analysts say that the turning point for rates will come later, perhaps early next year. Much depends on the incoming data, of course. Meantime, what is the Treasury market telling us? One way to cut through the noise in search of signals is to calculate a series of moving averages on Treasury yields. By that standard, the market’s sending mixed messages these days. The 2-year yield—considered to be the most sensitive spot on the yield curve for rate expectations—is trending up. The 5- and 10-year yields, by contrast, continue to trend lower, although there are some clues that suggest that the slide has run its course in longer-term maturities.

In sum, the Treasury market remains betwixt and between when it comes to pricing in a future of higher rates. The crowd appears to be toying with the possibility via the 2-year yield, but that’s as far as it goes at the moment. There’s still not much appetite for a more substantial commitment to regime change by way of 5- and 10-year Treasuries.

The following charts reflect exponential moving averages (EMA), which are arguably superior to a simple moving average (SMA) by placing more emphasis on recent data. As such, EMAs are a bit more sensitive to the latest trades vs. the SMA methodology of equal weighting the historical sample. The EMAs in the charts below come in three flavors: 50-, 100-, and 200-day rolling windows.

Let’s start with the 2-year Treasury. As the chart shows, there’s a clear upside trend in progress. Note the positive momentum underway based on the 50-day EMA’s rise above the 100-day EMA, which is above the 200-day EMA, based on daily data through yesterday (May 28).

By contrast, negative momentum continues to prevail in the 5-year market. Although there have been attempts to revive an upside bias, those rallies have come to naught so far. That said, we’re in the middle of yet another effort to raise rates. But until we see the 50-day EMA for the 5-year rise above the 100-day EMA, it’s reasonable to wonder if the latest rise is just another round of noise.

The benchmark 10-year yield tells a similar story. There have been several rallies, but so far the downtrend hasn’t been broken. But perhaps that’s about to change.  Note that the 50-day EMA for the 10-year yield ticked above the 100-day EMA in the last two days for the first time in more than a year. A sign of things to come? The answer will ultimately be determined by the economic numbers in the weeks ahead.