A 5% Ten-Year Triggers More Rate Peak Speculation

For weeks, the buzz in bond circles has been dominated by speculation the U.S. 10-year Treasury would hit 5%.

It finally did just that on Monday—for the first time since 2007—before collapsing by yesterday's close.

Its u-turn lower was forceful, resulting in a key reversal on the daily chart (typically a harbinger of a new downtrend). Coinciding with the move was talk of massive bond shorts unwinding their positions—i.e., buying back bonds and driving down yields.

Such technical trading phenomenon works against the psychology that's been pushing up rates. But the only reason that's relevant here is because it buys the economy more time to slow. Growth deceleration, not short-term trading psychology, is what'll drive rates back down sustainably.