Bond Market: The Strengthening of the Yields (10 Years) 

February 18, 2024, 9:53 pm EST

The Strengthening of the Yields (10 Years) 

The sudden rally of the stock markets has been strong and impressive. It started in late October 2023 and has continued strong as of today. Here are the gains:

  • Dow Jones ETF (DIA): +20%
  • S&P 500 ETF (SPY): +22%
  • Nasdaq-100 ETF (QQQ): +29%

This non-stop uptrend recorded the 14th (out of the 16th) weeks of advances for all major indexes. It is based on the expectation of the slowing down of the inflation pressure. 

According to the featured chart of the 10-year Yield of the US Government Bond, we can see the fall of the bond yield during mid-October and the end of December of 2023. 

However, in January and early February of 2024, it went sideways while the stock market kept making record highs. It is interesting to note this divergence because it signals that bond investors were cautious about the development of the inflation data. 

Finally, last week the Consumer Price Index and Producer Price Index began to send out alert messages where the bond yields surged a bit with a small breakout. 

We would like to point out that the strengthening of the yields is worthy of attention. If it keeps going higher it would give Federal Open Market Committee (FOMC) members a tough time to adjust its Fed Fund rates lower. Eventually, the higher rates environment would hammer the stock market again if this chart decides to climb higher. 

In conclusion, it could be an observation point to track this chart to prepare for the final top-out of the stock markets.

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