10-year looks to reverse

The 10-year failed to break a key resistance point at 4.88% (got close on 8/4) and has now sold off 10bps or 3/4 of a point. Same with the 30-year, which hit a resistance point at 4.99 on 8/4 and has backed up almost 12bps since.

Given this backup I thought I'd revisit the Fed Funds path analysis I did a couple weeks ago. It now looks like 2 cuts, not 3, are priced in assuming the Fed does not hike again. I also ran it assuming the Fed hikes again in November, since the futures market is telling us there is a decent chance of another FF hike sometime this year.



Here is how I'd interpret this. The 2, 3 and 5-year have decent value here but with little upside. I'd move to a neutral duration position, wait for something like 5.05%, and get long.