Taps Coogan – July 7th, 2023

The 10-Year Treasury yield has inched back over the psychologically important ‘4%’ level for the first time in a few months, breaking any downtrend that was emerging.

The move confirms that the long dated Treasuries bulls, while perhaps ultimately correct, have at least been ‘early’ in forecasting a move lower in yields due to recession fears. Indeed, with the Fed still doing QT as a torrent of new Treasury issuance hits the markets, it doesn’t take too much imagination to understand why rates have moved up.

There is no sign of the Fed backing off of QT, though the Treasury may slow new treasury issuance a bit as the General Account starts to refill. Regardless, with cash yielding significantly more than the 10-year treasury, it will presumably take much more acute recession concerns to move long rates meaningfully lower.