5%.. Ready or not? Here we go..

<p>And so, what does that mean for broader markets? Let's take a look.</p><p>Even with a <a href="https://www.forexlive.com/news/us-sells-20-year-bonds-at-5245-vs-5257-wi-20231018/" target="_blank" rel="follow">stronger 20-year auction</a> in Treasuries yesterday, it is doing almost nothing to stop the puking in bonds. Evidently, the waves of supply and the fact that the Fed can stick with a higher rates for longer narrative is the more important thing right now.</p><p>10-year yields are set to clip the 5% mark soon enough so what can we expect when they do get there?</p><p>For one, the pressure on equities is resurfacing with the Nasdaq posting its lowest close in two weeks after a 1.6% drop overnight. The S&amp;P 500 also ended 1.3% lower, failing to push towards a retest of its 100-day moving average.</p><p>That being said, there is no material breakdown yet in the equities space and we'll see if there will be added pressure once rates touch 5% soon enough.</p><p>Besides that, one thing to be mindful about is actually the lack of follow through strength in the dollar over the last one week or so. EUR/USD is still holding above 1.0500 and USD/JPY is unable to even muster enough confidence to challenge the Tokyo intervention mark at 150.00 again for now.</p><p>On the latter, judging by the correlation between 10-year Treasury yields and USD/JPY, we should be trading closer to 152.00 rather than 150.00 currently. But of course, Tokyo intervention remains a big psychological barrier that is in consideration. So, will 5% yields change that viewpoint? We'll see.</p><p>As we approach the 5% level, I can't help but think that the bond rout might trigger a sharp retracement upon hitting the key level. All that before we start getting used to talking about 5% again in the days/weeks ahead. It's a familiar playbook to when we hit 4% in July and 4.30% in August. </p>

This article was written by Justin Low at www.forexlive.com.