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How the 10-year Treasury yield has fared ahead of the June FOMC meeting

In this article:
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Yahoo Finance's Brian Cheung joins the Live show to help break down the bond market's movements during the Fed's interest rate hike cycle, and how it is digesting the May jobs report data.

Video Transcript

JARED BLIKRE: Welcome back. Another down day for the markets, and guess what? I have Yahoo Finance's Brian Cheung here with me. And we're going to talk about yields. We're going to talk about the 10-year specifically. We're going to nerd out. We're going to talk about basis spreads blowing up.

BRIAN CHEUNG: Oh, we love this.

JARED BLIKRE: Yes, I'm going to put a year to date of the 10-year. And you can see we got this high here. It was, what, 3.1, something like that?

BRIAN CHEUNG: Well above 300 basis points, yeah. But what you've kind of noticed recently is that things have kind of stagnated and stayed below the 300 basis point level for the 10-year. And all of that's kind of been coinciding with the commentary that we've been getting from the Federal Reserve, essentially solidifying that coalescence on the committee around two 50 basis points moves in the next two meetings in June and July.

Now, interesting to see that the run-up that we had seen over the three months that kind of preceded that May 4 FOMC meeting showed really just kind of the uncertainty over where the path of policy would go because of the fact that the 10-year yield is essentially a proxy for interest rates and interest rate policy from the Fed.

But Jay Powell, in that May 4 meeting, which, actually, to be fair, was right before the 10-year went above 300 basis points. He said, well, we have an agreement around 50 basis points in the next two meetings. That gives a little bit more certainty. The markets weren't really sure exactly how strong that was until commentary from Federal Reserve presidents in the weeks after that really solidified that we know it's going to be basically 50 basis points in June, and then also in July.

JARED BLIKRE: I just want to show one thing before we go here. Here's a max chart of the 10-year. And you can see, this trend is from the upper left to the lower left-- or excuse me, to the lower right here. And it is not broken.

BRIAN CHEUNG: But is that a breaking point there? That's a guy-- that's a question--

JARED BLIKRE: I'll tell you what--

BRIAN CHEUNG: --for the technical guy over here.

JARED BLIKRE: I think we consolidate. And we continue to trade in this range for maybe another year or two.

BRIAN CHEUNG: Can I just-- I'm just going to draw another line--

JARED BLIKRE: There you go.

BRIAN CHEUNG: --just because I just wanted to draw something.

JARED BLIKRE: We're looking good here.

BRIAN CHEUNG: There you go.

JARED BLIKRE: Thank you.

BRIAN CHEUNG: Technicals, man. Look at that. What do you call that formation?

JARED BLIKRE: I call it a down channel.

BRIAN CHEUNG: Yeah, I'm going to call that the bunny slope.

SEANA SMITH: I like it.

JARED BLIKRE: I like that. All right, Yahoo Finance's Brian Cheung, thanks for stopping by here on a Friday afternoon.