10-year US bond yields closed yesterday at 2.936%, according to Bloomberg, the highest rate for three years. It rose 8bps on the day, and 21bps over the (shortened) week. It is also up 60bps on the month to date and a staggering 143bps this year.
The move follows ongoing concerns about the pace of US monetary policy tightening, with St. Louis Fed President James Bullard saying earlier this week that he did not rule out a 75bps hike at the next Fed FOMC meeting next month. So far, however, EM assets have generally taken this move in their stride.
And recall, it's not that long ago we broke 2% – temporarily during February on a few days but more durably since mid-March (some 27 days ago). That gives a near 100bps move in less than six weeks (94bps to be precise). In fact, on the same basis, the rolling 27-day change was even higher, 98bps, on 14 April.
We think these are unprecedented moves when viewed over the past decade, worse than the only other similar selloffs in 2013 and 2016, and perhaps matched only in size – but in the other direction – by the period during the onset of Covid in March 2020.
Normalising the series, the size of the move becomes starker. By our reckoning, it's a near four standard deviation change.
The move takes us closer to 3%, which is perhaps a psychological barrier and a level that has arguably provided long-term resistance.
Will EM take a breach of 3% in its stride too? Where next? 3.5%? That's a level we haven't seen since 2011.