US Bond Yields Rally Further Ahead of a Major US Inflation Report

US Dollar (DXY) Price and Chart AnalysisUS 2-year yields break above 4.50%.Tuesday‘s US inflation report will be this week’s big market driver.

US Treasury yields continue to grind higher after the recent bout of hawkish Fed-speak ahead of a closely watched US inflation report. The CPI release is expected to show that price pressures are easing in the US but the speed, and the make-up, of this downturn will steer the US dollar, and a range of risk markets, over the weeks ahead.

The yield on the interest rate sensitive US 2-year US Treasury is back above 4.50% and back at levels last seen in late November. The sharp post-NFP rate re-pricing has seen the short-date rally by over 40 basis points as traders factor in a more hawkish Fed in the months ahead.

US Treasury 2-Year Yield Daily Chart – February 13, 2023

The yield on the benchmark US 10-year has also risen and currently changes hands around 3.77%. The 2s-10s curve inversion of 76 basis points is a fraction off the multi-year 80bps seen recently. Inverted yield curves highlight recessionary fears in the months ahead.

US Treasury 10-Year Yield Daily Chart – February 13, 2023

The recent move higher in the US dollar has stalled ahead of tomorrows inflation report but the technical set -up suggests that this move may not yet be finished. The bullish flag formation made over the last 10 days normally suggests a further move higher and a confirmed break of 103.60 will leave prior horizontal resistance around 104.30 the next level of interest. Above here the January 6 lower high at 105.36 comes into play.