10-year yields may be down slightly on the day but at 4.31%, they are over 25 bps higher from the lows seen on Monday last week. Traders are more wary amid the slew of US data in the week before, as the rates market also no longer prices in a full Fed rate cut for June. The odds of that have dropped to ~63% currently.

But what stands out more on the chart above is that we are seeing 10-year yields push past its 100-day moving average (purple line). There was a bit of a struggle in February for yields to move beyond that. But now, bond sellers are starting to take charge and they could do with some help from the Fed to confirm that break.

For now, the February high near 4.35% is likely to keep yields at bay until we get to the FOMC meeting tomorrow. Is June still on the table or has last week’s data changed that view somewhat? That is going to be the key question.

And amid the dot plots and Fed chair Powell’s speech, we might be in for a bit of a ride during the main event. The former is going to be heavily scrutinised to see if there are any changes to the 75 bps worth of rate cuts penciled in for this year. But if Powell keeps the door open for June, it is best to hold the Fed to that until the next set of key data releases at the very least.

This article was written by Justin Low at www.forexlive.com.