Tuesday brought a dose of encouragement for the bond market. It was the third straight day of gains--an uncommon feat in recent months, to be sure!  This raised the question: was it time to be more optimistic about the odds of 5% marking a new long-term ceiling in 10yr Treasury yields?  While it was fair to be encouraged, it was (and is) far too soon to be convinced.  Odds were (and are) that the bond market is simply in a consolidation phase after the recently sharp rate spike beginning in late September.

Today's early weakness goes a long way toward confirming the consolidation narrative.  It also means that the uptrend in yields starting on September 20th remains intact and linear.  The diagonal line in the chart below would likely not have been broken were it not for the Israel/Hamas Conflict.  (Note: the box in the chart below is not meant to suggest that the conflict/war is over.  Rather, this marks the time frame where financial markets were most actively engaged in a flight-to-safety trade surrounding the related uncertainties and global macroeconomic risks).

The consolidation pattern will face it's first major test tomorrow with the morning's economic data.  Between now and then, it makes most sense for yields to be between the two red lines.