2024-04-06 02:30:00 ET
Summary
- We think the Fed peaked in July 2023. Technically, we won’t know for sure until they cut.
- But, had a Martian alien landed on Earth and simply eyeballed the current movement of the 10yr yield, they’d likely conclude that the Fed had not peaked at all. Why?
- It’s not been trading in a manner consistent with prior peaks. Extrapolate that and 5% is a risk for the US 10yr.
In previous cycles, the 10yr yield typically managed to fall, appreciably (blue line in graph below). In the current cycle, the 10yr yield has in fact risen post the peak, and hit its cycle high of 5% in October 2023, some three months after the funds rate peak. And it remains elevated....
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Here's Why 5% Is Again A Risk For The U.S. 10yr