SCHQ - Rates: Tactical Upside To Yields

2024-02-08 09:59:00 ET

Summary

• The brief banking panic is behind us - at least until we get the next one.
• In front of us is a Fed in a holding pattern, and a May cut is now being questioned. As the Fed strip nudges higher, so too does the US 10yr yield.
• The 4.25% to 4.5% area is one where it will dawn on the market that it's gone too far. But for now, there is little to object to having that test.

By Padhraic Garvey, CFA

US remains pivotal, tactical upside to yields with Fed in holding pattern

The local high for 2024 for the 10yr Treasury yield was just short of 4.2%. It feels right to be back up here, threatening to take out that high and making a path to the 4.25% area. The area between 4.25% and 4.5% is one where it will begin to feel like things have gone a bit too far, and one big catalyst can see us crashing back below 4%. We are just not at that tipping point yet....

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