🚨US 10Y Treasury yield on the rise, but bond bears joy could be cut short by July 💰👏🏻

The recent movements in the 10-year Treasury yield have captured attention as it broke out of its established range due to hawkish statements from Federal Reserve officials and weaker Treasury auction results. However, analysts suggest that the grip of bond bears might not strengthen significantly as the U.S. benchmark yield could potentially fall back to the 4.30% to 4.50% range by July.

Evercore ISI points out that despite the recent breakout, the yield is expected to stabilize by July according to its tactical rate index. The fluctuation in yields has been attributed to a "tug-of-war" between bullish and bearish factors, with weaker economic releases being offset by hawkish statements from Fed officials and other factors like weaker Treasury auctions and rising home and consumer prices.

Minneapolis Fed President Neel Kashkari's remarks about needing more positive inflation data before considering a rate adjustment have been notable this week. He also mentioned the possibility of a rate hike, though deeming it unlikely.

Evercore ISI outlines four key trends necessary for the 10-year Treasury yield to move towards the 4.30% to 4.50% range, none of which seem firmly established at present. Additionally, seasonal factors are expected to weigh down on yields in May, June, and July.

Amidst this backdrop, Deutsche Bank forecasts the April PCE data, the Fed's preferred inflation measure, to come in at 0.26% month-on-month. This data release is anticipated to spark renewed discussions about potential rate cuts, particularly after another round of robust growth data.

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