Higher US bond yield risk

At Tricio we like to look at charts in order to gauge market sentiment and investor behaviour.  Our Weekly Talking Points for the week of 18^th May 2026 shone our Spotlight on US bond yields. Specifically, the risk of them heading a lot higher. We are posting some of our thoughts from our publication in this blog.

Our weekly Spotlight is on rising US bond yields. The top chart shows the yield curve (1-yr. ago in yellow, 1-mth ago in green, current in blue). The curve may steepen further over the coming months if the Fed refrains from raising rates, but the market prices in higher inflation/ok growth worries. Watch the 2-yr. note yield as 4% is being cleared. While the 3.5%-3.75% fed funds range ‘should’ anchor the 2-yr. yield, the market is pricing in rate hike risk. A break of 4.10% would leave 4.25%/4.40% and then 5% at risk – yikes!

The US 10-yr. note yield chart below (with 13/50-week moving averages) shows upside pressure building. Watch 4.6% (falling line) as a sustained break higher would leave yield gains to 5% at risk again. Further resistance is layered at 5.20%/5.30%. Market worries are about 6% yields. Chart worries point to 8% risk if the 5%/5.2% area is cleared. The latter is not favoured, just another thing to worry about.

We have favoured a neutral US bond holding in our asset allocation. At 5%, if reached, we would lean to an ‘overweight’ allocation on the view that 5.2%/5.3% may be tested, but not break.

For further information please contact us at info@tricio-advisors.com

Gerry Celaya

Chief Strategist