The US 10-year treasury yield has been on an upward trajectory, breaking above the 4.8% resistance level and inching closer to the elusive 5% mark. This development is significant, as it marks a potential turning point in the bond market.

For context, the multi-year range for the 10-year treasury yield has been between 2.5% and 3.5%. A close above 5% would take us out of this range, with little but vacuum above. This is not to say that yields won’t face resistance at higher levels, but rather that the landscape shifts significantly beyond this threshold.

So, what’s next for the bond market? While it’s impossible to predict with certainty, there are a few possible scenarios:

1. Continued growth: If the upward trend in yields continues, we may see the 10-year treasury yield push above 5% and potentially challenge the next resistance level at around 5.5%. This could lead to increased borrowing costs for consumers and businesses, which could have implications for economic growth.
2. Consolidation: Alternatively, the bond market may experience a period of consolidation around the new resistance level of 4.8%, with yields trading within a relatively narrow range. This could be driven by factors such as geopolitical tensions, central bank actions, or changes in investor sentiment.
3. Inversion: A more bearish scenario would involve an inversion of the yield curve, where shorter-term treasury yields are higher than longer-term yields. This has historically been a reliable predictor of recessions, and could signal that the bond market is anticipating a slowdown in economic growth.
4. Flattening: Another possibility is that the yield curve flattens, with shorter-term yields rising more slowly than longer-term yields. This could be a sign of a mature economic expansion, where interest rates are nearing their peak.