10-Year U.S. Tsy yields continue to operate within the confines of the uptrend channel established since the August low was registered. There was a marginal extension beyond the previous cycle highs during Monday’s session, before a pullback from best levels. A break beyond Monday’s high would open the way towards the upper limit of the uptrend channel and horizontal resistance drawn off the April ’11 high (3.6093%/3.6132%).
- The latest FOMC decision presents the key event risk for broader markets and U.S. yields this week. Our Fed preview highlighted that along with a 75bp hike at the September meeting, the FOMC will attempt to cement “higher for longer” rate pricing.
- The dot plot provides the first chance for a formal depiction of the Fed’s broader thinking on the matter post-Jackson Hole.
- A hawkish surprise from the Fed may be a pre-requisite to facilitate a challenge of the aforementioned technical resistance levels, although we cannot completely rule out the idea of a pre-Fed meeting test.
Fig. 1: US. 10-Year Tsy Yield (%)
Source: MNI - Market News/Bloomberg