5% breakout?
May 22, 2025
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–In October 2023 the 30y bond yield topped at 5.115% according to BBG. Since that time it’s been in a range of slightly below 4% to a cap of 5%. Yesterday at futures settle (USM5 110-25s) the yield was 5.087%. An upside breakout could easily target 5.5 or higher. Concerns about the tax bill and related high deficits are a factor, though yesterday’s 20y auction above 5% (5.047%) appears to have been the immediate spark. Analysts are also pointing to the jump in Japan’s 40y yield which is now > 3.6%. If the market is shunning long-dated ‘safe’ assets, then large US tech names are likely vulnerable.
–New buyer yesterday of 100k SFRM5 9650c for 0.5. Expiry in 22 days; SFRM5 settled 9568.25. Reach for wings can help cap risks in case things really start to spin out of control.
–Today’s news includes Chgo Fed National Activity, Jobless Claims expected 230k, S&P PMIs and Existing Home Sales.
