Bond Yields Moving Back Up Again
US bond yields have been on the decline recently. Following the concerning 70% rally we saw over most of Q3, the US 1O-yr yield has since corrected by around 15%. A large part of this has been the shift in market perspective recently regarding Fed tightening expectations. Traders have become increasingly eager to call a top in the Fed’s tightening program. Last week’s softer-than-projected October US CPI release was taken as a clear sign that the Fed will opt for a smaller rate hike in December, marking the start of the Fed Pivot.
Fed Pivot Not Done Deal
However, over the last couple of days, bond yields have started to creep higher again. With the latest US retail sales data coming in above forecasts, the doves’ argument that Fed rate hikes are harming the economy has lost some impact. Additionally, we’ve heard some hawkish comments from Fed members into the end of the week which have also caused some concern. Fed’s Bullard was the most hawkish this week, calling for US rates to peak around 5% – 7% in order to drive inflation back to target, well above the Fed’s own current peak-rate projections.
US 10-yr Yield
The failure at the 4.248 level has seen the market breaking down below the 4.000 level, confirming a double top-lower high. With momentum studies having turned bearish, the focus is on test of the next big support zone around 3.615 – 3.492. While price holds above here, there is risk of a further push higher in the medium view. If bulls can beak back above 4.000, bears might well be in trouble.