The 10-year Treasury yield broke above 4.56% resistance last week, signaling markets are pricing a higher-for-longer Fed. Next week's US CPI report will test whether the breakout holds.
US Treasury yields broke above a key resistance level last week, delivering the clearest directional signal in a session otherwise defined by crosscurrents. The 10-year yield rose from 4.49% to 4.57%, closing above the 4.56% level that had capped the move since mid-May. The breakout came after the Federal Reserve's June meeting minutes revealed a committee divided over whether another rate hike might be needed this year.
The week brought no shortage of headlines. US-Iran tensions flared and then eased. The Reserve Bank of New Zealand surprised with a 25-basis-point rate hike. Canadian employment came in stronger than expected. Yet most asset classes ended the week near where they started. Oil briefly topped USD 80 before settling near USD 75. Gold and silver recovered early losses. Equities were mixed, with the S&P 500 and NASDAQ edging higher while the Dow Jones Industrial Average slipped after touching a record. DOW, with an Alpha Score of 40, ended the week lower despite briefly hitting a record high.
The exception was the Treasury market. The 10-year yield's break above 4.56% was driven almost entirely by repricing of Fed expectations. The FOMC minutes showed that "a few participants" saw a case for raising rates at the June meeting itself. Markets responded by pricing a roughly 70% chance of a September hike, up from 63% before the release.
The dollar did not follow yields higher. The Dollar Index consolidated below the 101.80 resistance level, ending the week little changed. The divergence suggests currency markets are waiting for the US CPI report due this week before committing to the next leg. Technically, the dollar's broader uptrend remains intact as long as support at 100.20-100.31 holds. A break above 101.80 would target 102.71.
Currency performance was driven by domestic fundamentals rather than broad risk sentiment. The New Zealand dollar was the strongest major currency after the RBNZ hike and a strong manufacturing PMI. Sterling and the Canadian dollar also gained, supported by the unwinding of short positions and strong employment data respectively. The Swiss franc and yen underperformed. Rising yields reduced demand for low-yielding currencies. The euro and Australian dollar ended in the middle of the pack.
EUR/USD continued its consolidation from 1.1323. A break below that level would target 1.1175. A move above 1.1499 would turn the bias back to the upside.
The US CPI report, due Wednesday, is the next major catalyst. A hot print would reinforce the case for a September hike and likely push yields higher, testing the 4.69% peak. A soft print would revive bets on a hold and could trigger a reversal in yields. The data will determine whether the breakout in yields is the start of a new leg or another false start.
Drafted by a large language model from the source reporting linked above, then screened by automated publishing checks. It is not read by a journalist before publication. Some articles cite our Alpha Score. Verify prices and figures against the original source. Educational coverage, not personalized advice.