US 10-year yields broke the June high today but have been reeled back in

The mood in markets is sour but if there’s a turnaround it might come first in bonds and the long end in particular. US 10-year yields broke the 3.5% barrier and the June high today but in the last hour have given back a big chunk of the gains.

Last they were up 3 bps to 3.478%.

Analysts at BMO say we’re near a top in yields:

” we remain in the camp that the burgeoning appeal of safe haven duration and a growing dip buying bias from real money investors will eventually trigger a positional realignment that adds to the speed and severity of a rally,” they write.

They highlight this chart, which they highlight as evidence of real money buying bonds.

“Leveraged
funds are their shortest since August 2022 following the impressive net long bias that emerged in 2021. The inverse
has played out in the asset manager community as real money positioning has reached its longest since early 2020.
This is very much in keeping with the anecdotal evidence of real money beginning to take advantage of rates that
have backed up once again to within striking distance of cycle highs even as the fast money community continues
to press the short. Said differently, the pain trade is toward lower rates, and it’s this dynamic that contributes to our
underlying bullishness.”

As long-end yields have come back in, there has been some mild selling in USD/JPY and the dollar more broadly.