Which Way Will Yields Break

Along with oil prices resuming their upward climb in the last couple of weeks, we’ve also seen a similar resumption of the uptick in interest rates, as investors price in a combination of higher inflation and larger deficits from any potential escalation of hostilities in the Middle East. At a yield of 4.45%, the 10-year US Treasury is on pace for the highest close since last July and not far from the 4.48% high in late March.

While yields push towards multi-month highs, the last three years have been much more range-bound. Over this period, yields bottomed out just below 3.25% in April 2023 and peaked out just under 5.02% six months ago.  Since then, the yield has remained contained in that range with a series of lower highs and higher lows. After bouncing off the low end of that narrowing range in late February, yields are now pushing towards the upper end of that narrowing range as global markets brace for whichever way yields ultimately decide to break.