And interest rates are trending lower since peaking last October.
But looking ahead to next month, we could see rates correct higher.
The US 10-year yield tends to rise in February – more so than any other month of the year except April:
It would make sense for this seasonal trend to continue.
The 10-year yield dropped more than 100 basis points during Q4 last year.
The Fed’s hiking cycle has desensitized many to the large swings in treasury yields. Nevertheless, that’s a significant move for the US benchmark.
A retracement in the coming weeks compliments a more prolonged decline over the coming months and quarters as yields don’t move in a straight line.
A near-term rise in the 10-year also fits with the recent US dollar strength.
So, how far will rates rise in the coming months?
The 4.25 area seems reasonable:
It coincides with the October 2022 peak and the 38.2% retracement of the recent decline.
The 10-year yield hovers roughly 15 basis points below that level today.
I want to give the US benchmark rate extra room to recover from last quarter’s decline, re-evaluating the intermediate downtrend if the 10-year rips above 4.50. It’s a run-of-the-mill correction until then.
February likely brings sideways action for all the major asset classes – stocks, bonds, and commodities. Don’t let the choppy action throw you off course.
