As soon as Pelosi entered into Taiwan airspace, there was a release of pressure in the bond market as yields jumped higher and stuck it out until the end of the day. What looked like another like another day of buying since the Fed last week eventually turned into a rout that brought up a reminder of the heavy selling back in June.
10-year Treasury yields closed up 17 bps to 2.75% and while that erased most of the drop since Thursday last week, it is falling short of convincing of a notable technical turnaround:
The broken neckline now acts as a resistance point for yields alongside the 100-day moving average (red line) and that remains key levels to watch if bond bears are to really be stubborn and make a move to fight back.
Otherwise, keep below that and the 2.70% level and the recent bid in the bond market is still very much vindicated. US-China tensions will continue to be a factor to watch in the days ahead as the Chinese military prepares for live-fire drills and special operations in Taiwan. But there is also the US non-farm payrolls on Friday to watch in assessing the Fed outlook.