Weekly Commentary: Currency Pegs And Carry Trades

2026-07-11 03:20:59 ET

Ten-year Treasury yields rose eight bps this week to 4.56%. Yields rose to 4.60% intraday in Wednesday trading, the high since May 21st - and only seven bps below the May 19th peak closing high (4.67%). It's worth remembering that 10-year Treasury yields dropped to a February 27th low of 3.94%. Five-year Treasury yields traded to 4.34% Wednesday (closed week at 4.30%) - the high back to February 2025. Two-year Treasury yields traded to 4.23% intraday Wednesday, also the high since February 2025 (closed week at 4.21%). Benchmark MBS yields rose to 5.56% Wednesday, the high since the May war spike (closed week 5.53%).

July 7 - Axios (Courtenay Brown and Neil Irwin): "Financial markets increasingly have a new bet about the next phase of America's economy: Inflation may be coming under control, but borrowing costs could stay higher for longer. The de-escalation in the Iran war and the reopening of oil flows have caused a marked improvement in the near-term inflation outlook, but that hasn't translated into cheaper overall borrowing costs. Rather, bond prices are indicating higher real interest rates, counteracting the decline in market-based inflation expectations. It means that the energy price retracement has brought little relief to rate-sensitive sectors."

July 9 - Bloomberg (Elizabeth Stanton): "An auction of 30-year Treasury bonds Thursday drew the highest yield in nearly 20 years… The bonds were awarded at 5.058%. While the auction result was the highest since 2007, it was lower than anticipated…"...

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