US bond yields can’t rise forever

By Peter Bukov|

Published: February 25 2021, 10:36 GMT+0

US bond yields can’t rise forever


Another day, another rally in US yields. Whether you are a bull or bear, you must admit this can’t go on forever, or the financial system implodes.

In his second day of testimony before Congress, Powell helped calm fears that higher inflation rates could see the central bank tighten monetary policy, reiterating the central bank’s desire to get the US economy back to full employment. 

“Our policy is accommodative because unemployment is high and the labor market is far from maximum employment,” Powell said on Wednesday.

That was enough to calm the markets, and yields fell slightly, but they reaccelerated higher today, rising above 1.4% again. Spiking yields could cause many problems, such as issues with refinancing, the stock market’s sharp correction, higher unemployment, etc. 

Additionally, the 10-year yield is very extended from its 10, 20, and 50-day moving averages, which usually implies a reversal (correction) to the mean should occur. A decline in 10-year yield back to the averages at around 1.2% would certainly help to ease the fears of a rate shock.

Later in the day, US durable goods are due and jobless claims, probably causing some volatility in the financial markets.