10-yr yields over 5.5 pct to signal bear mkt dawn

NEW YORK (Reuters) - A sustained break above the 5.5 percent level on benchmark Treasury note yields would signal the dawn of a long-term bear market for bonds, one of Wall Street's most widely followed chartists said on Tuesday.

"You are probably already in it but moving gradually into it," Louise Yamada, founder of Louise Yamada Technical Research Advisors LLC, said at the Reuters Investment Outlook Summit.

In Tuesday morning trading, yields on 10-year U.S. Treasury notes <US10YT=RR> were driving above the 5.2 percent level. Treasuries are in their sixth consecutive week of price declines, which has sent their yields to their highest in about a year. Bond yields move inversely to prices.

"Over the past 25 years, every backup in yields failed to exceed the previous backup," Yamada said, which was one of the technical hallmarks of the long-term bull market for bonds dating back to the peak in yields in the early 1980s.

Now, however, a composite view of yields on 10-, 20- and 30-year bonds is threatening to push through the 5.33 percent level, she said. "If this Treasury composite goes through 5.33 percent, you will have seen the first backup in rates that does exceed (the previous backup) in the past 26 years."

That would confirm the start of a long-term downtrend for bond prices.

Among the key factors driving yields up is the diversification of reserve investments by foreign central banks away from U.S. assets, particularly Treasuries. That trend threatens to quicken the pace of rising yields.

"Foreigners buying less of our Treasuries may accelerate the rate at which yields may begin to rise," Yamada said.

(For summit blog: summitnotebook.reuters.com/)