Over the past week, Treasuries have picked up where they left off in the late stages of last year. US 10-year yields are still on the rise, and we are now approaching 2024 highs near 4.70%. The actual high last year was around 4.74%, but that may not be too much of a hurdle if sellers continue to pile on and off the 4.70% mark this week. Are we on the warpath back to 5%?

I wouldn’t rule it out, honestly. At some point last year, that would have been unthinkable given the Fed’s outlook. But it only takes one election result and how things turned out.

As Adam pointed out here, addressing the deficit doesn’t seem to be a priority for Trump. And understandable, because it is a question that no president deals with. Ultimately it will just be a case of kicking the can down the road as always.

If yields go back to 5%, that’s a big risk that the broader markets really need to consider.

The dollar is already in a strong position to start the new year and as such could cause more tailwinds. Right now, the narrative is largely driven by Trump’s strong-arm policies. So therein lies the risk for the markets as we await his inauguration later this month.

But if yields jump again from now, I fear it will be a painful start to the year for risky trades. US indices are already looking a bit shaky after yesterday’s data. Now the focus turns to Friday’s US jobs report.

If labor market conditions remain hot and reaffirm more reasons for a Fed pause, that could be the trigger that sets the ball rolling in the bond market for yields to rise again. The upcoming showdown on Friday will be a big, big one to watch.