Treasury yields at the highs for the day ahead of North American trading
10-year Treasury yields are up over 7 bps at 1.612%
The market managed to catch some relief over the past few days as 10-year Treasury yields eased lower from 1.60% on Monday to a low of around 1.48% yesterday. But when sentiment turns, it sure turns rather quickly.
On the day itself, 10-year yields are up over 7 bps and trading at the highs now of 1.61%. The Treasury auctions (which were rather meh in general) and the ECB this week has arguably failed to inject the needed degree of calmness back into the market.
Even the passing of Biden's $1.9 trillion stimulus, whilst positive overall, has proved difficult to keep the peace when the volatility swing in the bond market is as it is today.
All eyes now will be on the Fed next week and we may yet see the selloff extend ahead of the FOMC meeting as Treasuries sit on the verge of a further breakdown:
That will put yields on the path towards 1.75% to 1.80% and depending on how quick that plays out, it will reverberate across other asset classes accordingly.
As things stand, I would argue the market isn't so much so afraid of higher yields in general. As seen this week, as long as the bond market manages to stabilise and exude some element of calm, risk trades can also thrive given the circumstances.
In essence, it is more so about the pace of the selloff/rout in bonds.
Dip buying opportunities will still be there for investors to take on but unless the Fed pushes back against the bond market more firmly in some way, expect this week's volatile swings to be more commonplace moving forward.