The most important task of the Treasury and the Federal Reserve is to ensure that the bond market functions properly and remains liquid. A few weeks ago, our tariff policy caused the bond market to act erratically due to uncertainty and the initial shock to the system. Fortunately, liquidity is normal, and the bonds are stable. However, a new trend has been established: bonds are under constant pressure from foreign selling and a potential resurfacing of inflation.
The 10-year note is currently trading at 4.53%. This is not a concern yet, but if it breaks the resistance at 4.60%, it will open the door to a yield rally (bond selling) all the way to 5% or above. Keep an eye on those levels. This will have an immediate effect on other asset classes, including equities, metals, and other commodities.
Dennis
