Stocks Suffer As 10Y Yields Reach 2014 Highs, Curve At Inflection Point

Overnight saw 10Y Treasury yields touch 2.64%, topping the post-election peak to its highest since September 2014 (and crossing Jeff Gundlach's "red line" for stock damage). However, the yield curve's bear-steepening may suggest a turning point.

10Y is up almost 30bps since The Fed hiked rates in December...

 

https://www.zerohedge.com/sites/default/files/inline-images/20180118_UST2.png

Highest 10Y since Sept 2014...

 

https://www.zerohedge.com/sites/default/files/inline-images/20180118_UST1.png

For some context across the curve, US Treasury Yields are the highest since...

  • 1-Month: 2008
  • 3-Month: 2008
  • 6-Month: 2008
  • 1-Year: 2008
  • 2-Year: 2008
  • 3-Year: 2008
  • 5-Year: 2010
  • 10-Yr: 2014
  • 30-Yr: 2017

The question is, of course, what happens next? Extreme short positioning in Treasuries is likely not going to help but as Bloomberg points out, the 10Y-2Y spread is back at levels that have been greeted by aggressive flattening trades...

https://www.zerohedge.com/sites/default/files/inline-images/20180118_UST%5D.png

So will that stymie the surge in yields?

For now it appears Jeff Gundlach's warning about bonds damaging stocks at these levels is coming true...

 

https://www.zerohedge.com/sites/default/files/inline-images/20180118_UST3.png