The US 10 year yield continues it’s push to the upside and in the process has moved to a new cycle high, to a new high going back to July 2019 and toward the 61.8% of the move down from the October 2018 high to the low reached in March 2020. That level comes in at 2.134%. A break above that level would be another step in the upward direction.
Drilling to the hourly chart below, the move higher today was first able to extend above swing highs going back to February 10, February 11, February 15 and February 16 between 2.056% and 2.063%. The price spiked higher and then corrected back down to retest the broken level. That support area held support and the price pushed to new highs.
That area – between 2.056% and 2.063% – will now be support. Stay above, and the trend to the upside continues.
Fundamentally, the move to the upside is being helped by less of a flight to safety bid from Ukraine/Russia (hopes for peace) and continued inflationary pressures and expectations going into the FOMC meeting that will start tomorrow and conclude on Wednesday at 2 PM. The Fed chair has said that he favors a 25 basis point hike, but that he would NOT be opposed to 50 basis points if inflation continues to move in the upward direction going forward.
Will the other Fed officials who are more hawkish, be able to talk the Fed chair (or has his mind changed already) and those looking more toward 25 basis points, to a 50 basis point hike?
It would be out of character for the “transparent” Fed chair.
However, the markets have already done the tightening for the Fed. The 10 year yield is up from 1.668% just since the March 6 low (around 45 basis points). The two year yield is up from 0.762% in early January to 1.832% currently (107 basis points). The current Fed funds target rate is at 0.0% to 0.25%. Let’s face it, moving the short term rate to 0.50% to 0.75% should not be all that impactful..
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