10yr yields were at the bottom edge of a months-long uptrend heading into the Georgia senate election.  One result would have helped them break out to lower yields while the other all but guaranteed a break up and over 1.0%.  We got "the other," and bonds have been trading fairly logically since then.  The next big question is whether or not there was additional negative momentum waiting for an opportunity to strike.  So far, the answer is not looking great as this morning's yields are already slightly higher than yesterday's highs.

Here's how the past few days have looked in the context of the longer term trend:

Zooming out a bit helps us visualize the narrative of gradually higher yields since turning the covid corner this past summer.

But wait, you say?  How can I say we've turned a covid corner with case counts and deaths at all time highs?  Remember, it's not about case counts unless the case counts are having a direct and measurable impact on the economy.  Unlike the initial surge and lockdowns in the spring, the winter surge has yet to result in the same sort of economic calamity.  Granted, the ill effects could show up in the data over the next few months, but if anything, the data has been surprisingly decent.  Couple that with the promising longer-term outlook courtesy of vaccines and it doesn't make nearly as much sense as it once did for traders to own 10yr debt at yields under 1.0%.

All that having been said, things still suck for a lot of people and for several key sectors of the economy.  That's why yields are only now breaking over 1% as opposed to 2%.  In other words, if all of the pre-covid jobs were restored and case counts were clearly on their way to near-zero levels, we would expect the Fed to be dialing back asset purchases and for 10yr yields to approach 2% about as quickly as they approached 3% in 2013.  Fortunately for low rates (and unfortunately for those left unemployed by covid), the restoration of pre-covid employment is a big unknown.  It's a question that will take time to answer.  Many economists are less than optimistic about it.  And without the reclamation of those jobs, it would be hard for the upcoming taper tantrum to be as abrupt as 2013.