US 10-year yields are up 6 basis points today to a session high of 2.60%. It’s been a one-way move up from 2.30% on August 15. The next technical level to watch is 2.62%.
It’s a complicated trade because German bunds seem to be in the drivers’ seat. After falling to 0.86%, German 10s are up to 1.09%. The thinking is that Draghi did enough to stave off deflation with rate cuts, ABS purchases and covered bond buys. Even if sovereign QE comes, it probably won’t be until March so it was time to take some profits. At the same time, if the measures are effective it could get the economy moving again and if inflation starts to pick up in 3-4 years, holding a note yielding 0.88% doesn’t look very good.
In any case, the sell off in Treasuries is good news for the dollar (at least in a vacuum).
