Short-term Treasury yields lead a climb that lifts the 10-year to 5.10%, a three-week high

The 10-year Treasury yield closed at 5.10% on Thursday, November 12, up 12 basis points from its November 10 close, according to Treasury's daily par yield curve. It is the highest 10-year close since October 21. The 2-year yield rose 13 basis points to 4.86%, its highest since September 30.

The climb was widest at the short end of the curve

Treasury's table has no row for Wednesday, November 11, so the changes below are measured against Tuesday, November 10. Over that span the 1-year yield rose 9 basis points to 4.65% and the 3-year 16 basis points to 4.90%. The 5-year gained 14 basis points to 4.95%, the 30-year 8 basis points to 5.43%, and the 20-year 9 basis points to 5.48% (all computed from Treasury's closing figures).

Because the 2-year rose slightly more than the 10-year, the gap between them narrowed to 24 basis points from 25 (computed). The move has been larger over a week: on November 5 the 2-year closed at 4.46% and the 10-year at 4.84%, so the 2-year has added 40 basis points since then and the 10-year 26 (computed).

Back to the level of three weeks earlier

The 10-year was last higher on October 21, when it closed at 5.13%, before it slipped to 4.96% the next day. The 2-year stood at 4.88% on September 30 and 4.78% on October 1. Treasury's table shows these levels; it does not say what moved the market on any of these days, and this report does not attribute Thursday's rise to a single cause.

For context, earlier FinanceInTime coverage described the 10-year returning to about 5% after the October consumer price report, with the 2-year moving more than the 10-year. The 10-year closed at 4.98% on November 10 and has since added another 12 basis points.

Stocks were mixed around the move

The Dow Jones Industrial Average closed at 52,297.09 on Thursday, down 189.40 points, or 0.36%, from 52,486.49 on Wednesday (computed from FRED data). The S&P 500 closed at 7,619.38 on Wednesday, up 1.31% from 7,520.93 on Tuesday (computed); its Thursday close had not yet been posted in the same series.

The calendar that decides the next move

The Federal Open Market Committee next meets on December 8-9, according to the Fed's calendar. Until then, Treasury's daily table will show whether the 10-year holds above 5% or returns to the 4.84% to 4.98% range of the past week.

A bond market that reprices faster than equities is worth heeding

We think the yield curve is telling a more cautious story than stock prices did on Wednesday. Short-dated yields have risen the most, which is how a market looks when it raises its estimate of where policy rates will settle, and the 2-year's 40-basis-point rise in a week is a larger shift than the Dow's move on Thursday. Single-day moves are weak evidence, and the data above do not show why yields rose.

The threat is that a 10-year yield above 5% raises financing costs for companies and households at the same time. The opportunity is that higher yields on short-dated Treasuries already pay more income at low duration risk, which raises the bar that other assets have to clear. We expect rates to remain the main driver of markets until the December 8-9 meeting if the 10-year stays above 5%, and we would change that reading if it falls back below 4.90% and the 2-year follows it down.

The view in this final section is FinanceInTime's editorial opinion, for information only. It is not investment, tax, legal or other advice, and it does not take your circumstances into account. Forecasts are uncertain and past results do not guarantee future ones.