30-year yields are up another 3 bps to 2.117% on the day, backed by a hawkish Fed overnight. A rise in short-term yields is one thing that could give the dollar a light impetus but a rise in long-term yields is arguably a more lasting tailwind.
Amid the break of the trendline resistance and 200-day moving average, the next target for 30-year yields is the October highs near 2.18%. That coincides with key resistance for 10-year yields too as pointed out here.
As much as the bond market move here is garnering much attention, is it one that is coming too early?
The calls coming into this year is for higher yields but we’re already seeing a significant chunk of that in the opening week itself.
I’m not doubting the potential for yields to stay more elevated. However, much like last year, we could reach a point where long-term yields stall as the Fed starts to outline the upper limit of its latest tightening cycle. Not to mention that if inflation pressures also reach a peak at some point during the year.
As for the dollar outlook, higher Treasury yields typically is a good thing. But keep in mind that real yields are still knee deep in negative territory and that counts for something. As such, it may not be as big a tailwind as one might think. That being said, is there anything else better out there especially when risk trades are looking vulnerable?