The five-years space in Treasuries is always an interesting spot. There's a Fed influence there and short-term inflation is important but it's also a good measure of Fed credibility over the medium term and is caught in safe haven flows.
Today, it's down 4 bps to 3.63% with most of the move coming after the UMich consumer sentiment and inflation expectations data. That dip only half-erases yesterday's rise and barely puts a dent in the 100 bps rally since early August.
The chart isn't a pretty picture and that looks like it could be a break but it's also deeply oversold (prices move inverse to yields).
Ultimately, if you think the Fed has credibilty on inflation and you're worried about a recession or overtightening, getting 3.6% for five years is attractive. Corporate spreads over Treasuries add some more juice to the equation as well. A steady stream of foreign money into that space has helped to lift the dollar in the past month but a retracement would take the dollar down with it.
