5% proves a tough hurdle for the Benchmark Treasury Yield

From a technical standpoint, the retreat is not especially surprising. On September 15, the yield reached 5.041%, its highest level since June 2007. That move also brought it within striking distance of the upper yearly Bollinger Band near 5.06%, suggesting gains beyond the October 2023 high of 5.021% would not come easily.

Momentum indicators were also flashing caution signs. The nine-week Relative Strength Index (RSI) ended last week at 77.4, its most overbought reading since October 2023. With yields retreating this week, the RSI has already dipped back toward the key 70 threshold, suggesting the market may be poised to work off more excess bullishness.

Support sits near 4.81%, followed by 4.74%. The rising 20-week moving average, now around 4.65%, is an important line in the sand. The 10-year yield has not posted a weekly close below it since late February.

If yields decisively clear the 5.06% Bollinger Band area, the next upside targets are near 5.15% and then the 2007 high around 5.33%.

The benchmark US 10-year Treasury yield US10YT=RR is pulling back this week after briefly climbing above 5%, as falling oil prices ease some inflation concerns.

The retreat began Monday as Treasury yields declined alongside oil and European bond yields. Hopes for diplomatic progress in the Iran conflict ahead of this week's United Nations meetings helped send crude lower. Since the recent oil surge has been a key driver of inflation worries, the pullback offered bond investors some relief.

Even so, Chicago Fed President Austan Goolsbee struck a hawkish tone, saying inflation may increasingly reflect strong underlying demand, potentially requiring a faster pace of Fed rate hikes.

Oil extended its decline Tuesday, hitting a two-week low after signs supply concerns could ease. Iran indicated the Strait of Hormuz could reopen within seven days, while Saudi Arabia is preparing to resume exports through its Red Sea port of Yanbu.