Today’s spike in US Treasury yields could be the beginning of an ominous technical signal

The US 10-year Treasury yield rose a whopping 13.3 basis points today, moving closer to the key level of 4.35%. The chart looks like a rough head-and-shoulders pattern, but even if it isn’t, a 4.35% break would be encouraging. The target measured by H&S would be approximately 4.65%.

What is driving today’s price trends?

Chairman Powell stressed on Friday that there is no need to rush to cut rates, with the market currently pricing in just 65 bps of interest rate cuts this year, down from the 80 bps post-FOMC. The probability of a June meeting drops to 58%.

Second, today’s ISM manufacturing surveys were of high quality and the prices paid were high.

All in all, I don’t think this news justifies 13.3 bps, especially since Friday’s PCE was also a little cooler.

So I looked at the calendar and wondered if last week’s end-of-quarter rebalancing had suppressed yields, or if funding was in progress to move money into riskier assets like stocks for the start of the new quarter. I’m thinking about whether it’s inside or not. There are also questions about the Bank of Japan’s purchases, yesterday’s strong China PMI, and the potential for it to rise along with the resulting global inflation pressures.

Ultimately, I think this issue needs to be judged from a technical perspective. The problem is that it’s not just U.S. Treasuries that are affected by the outcome. If I break out, it could put pressure on USD shorts and disrupt crowded stock trading.

I’ll keep an eye on it this week as well.