The Yield on the 10-Year Treasury Note continued its ascent after an orderly pullback occurred this week following a break to new highs of 2008.  It appears it is set to continue to higher yields.

The 10-Year T-Note Yield Chart (currently stands just above 4.0%)

Price is in a confirmed short-term uptrend, and stands above its 20 and 50 day moving averages after making a new swing high crest and piercing its 200 day moving average.

The recent retracement to the rising 20 day moving average served as a successful test and the yield could be set to continue its uptrend for the time being.

This would be inline with recent reports that Fed Chairman Bernanke is more concerned with inflation now, and is rather unlikely to lower rates further unless “the economy falters severely.”

To combat inflation, the Federal Reserve often raises interest rates in an effort to produce a tighter monetary supply policy.  The Bond market often forecasts economic conditions and Fed policy decisions prior to their occurrence.

According to the Reuters article:

Berrnanke described overall inflation as “significantly higher than we would like,” the second straight day in which he sounded a warning on inflation, which financial markets took as a firm signal that interest rates are likely on hold for some time.

The 10 Year T-Note Price shows the opposite chart, which might be about to break support and descend to new 2008 lows:

Price successfully tested the rising 200 period moving average to the downside, but has retraced back into moving average resistance via the falling 20 and 50 day moving averages.  Price is still in a confirmed downtrend, and has been falling since mid-March (which corresponded with the lows in price in the US Stock Market).

We will continue to watch these developments, and what it may mean for the US Dollar, Interest Rates, and of course the US Stock Market.