Well, it finally happened: 10-year US yields traded with a five-handle on Monday, an “achievement” weeks (months) in the making.

The high was 5.012%, just shy of the October 23, 2023, cycle high of 5.019%.

Dip-buyers, who’ve been largely absent from the secondary market even as they showed up at auction last week, finally emerged. Benchmark US yields pared the advance to trade as low as 4.934%.

If the 10-year closed below 5% on September 14, this breach will look like a repeat of the 2023 episode, when yields likewise ended the session with a four-handle.

Naturally, Monday’s “milestone” was accompanied by all manner of calls for the selloff to extend. The digital ink wasn’t even dry on a Bloomberg piece quoting a couple of people you’ve never heard of suggesting yields could go as high as 5.5%, before yields were on the day lows.

I won’t pretend to know whether Monday marked the high, but as I wrote over the weekend, I wouldn’t be surprised to see a bear market rally.

“From a technical perspective, the market is oversold and due for a round of consolidation if not a partial bullish retracement of the latest leg of the selloff,” BMO’s Ian Lyngen said Monday, before cautioning that “technical factors have been overshadowed by the macro fundamentals throughout September, and that will likely remain the case this week given the importance of Fed events.”

It’s worth recalling Goldman’s rule of thumb. It’s not only (or necessarily) the level of yields that matters for stocks, it’s the scope and, especially, the rapidity, of rate-rise that counts.

The figure above gives you a sense of what that rule of thumb “looks” like. “During the past few decades, stocks have usually generated positive returns alongside rising interest rates
unless the pace of rising rates exceeded two standard deviations,” Goldman’s Ben Snider remarked.

In today’s context, a two-sigma move would equate to 50bps over a month. Or around
30bps over two weeks. “The speed of the rate moves during the last few weeks helps
explain why stocks struggled to digest those changes,” Snider wrote.

If you ask Snider’s counterpart over at Morgan Stanley, this’ll probably all work out ok. “It’s no secret the US economy is booming at the moment, led by a generational capital spending cycle,” Morgan Stanley’s Mike Wilson, who’s pretty sanguine these days, said.

“Interest rates have been rising this year mainly because of stronger nominal GDP growth rather than heightened concern about the US Treasury’s ability to fund the government,” Wilson went on, reiterating that the term premium, while elevated versus artificially suppressed levels witnessed post-GFC, is reasonable and seems to have plateaued.

As it turns out, Scott Bessent agrees. “We’ve had two very strong Treasury auctions. The Treasury market is in very good shape,” he said late last week. “Investors are not demanding a premium for longer-term US debt. So, I’m not sure where the beef is.”

Might I remind Bessent about the promise he made to US households shortly after assuming the role of America’s chief bond salesman. “The president wants lower rates,” Bessent told Larry Kudlow, during a Fox Business interview conducted just a few weeks after Donald Trump’s second inaugural. “He and I are focused on the 10-year Treasury yield.”