There was a less-than 20 minute window where investors could get risk-free US dollar yields of 5% for 30 years.
It was the first crack at 5% long-term yields since 2007 and is a life-saver for insurance and pension managers. It looks like they took full advantage as yields have been bid back down to 4.87%.
US 30s daily
Whether we get back to 5% will depend on economic data, starting with today’s ISM services report. It’s a good forward-looking indicator on the biggest part of the US economy. Looking at the chart, the stabilization and bounce in Q2 goes a long way towards explaining the latest leg in USD strength.
If the latest improvement to 54.5 proves to be fleeting, it would start to build an argument for capping yields but it would have to be followed by many data points. Given the current momentum, that’s a tough theory to get behind.
I’m reminded of US 10s at this time last year. They broke 4% briefly and then retreated all the way back to 3.56% in the following week before running to 4.3%.