The sharp fall in Treasury yields yesterday is bringing back the focus on the bond market, with 10-year yields nearing a key supportive region close to 3.30% since the turn of the year:
Looking over to Fed pricing, a 25 bps rate hike for May is now basically a coin flip. Fed fund futures are indicating 51% odds that there will be no change to interest rates, with the remaining 49% odds favouring a 25 bps rate hike.
A neat argument that can be made now is that the fine line balancing the two options is the floor threshold for 10-year Treasury yields as pointed out above.
If markets are convinced that Fed rates have peaked, then we are potentially going to see yields break lower. On the flip side, if markets are seeing that the Fed might keep up the pace, then yields are perhaps going to stay supported for now.
The big event this week that will be a determining factor will be the US non-farm payrolls on Friday.