10-year Treasury yields are down today to 4.77% and that is just slightly off the high from yesterday of 4.80%. It is holding at its highest levels since November 2023 and all eyes are on whether or not we will see yields touch the critical 5% mark. That marked the 2023 high before things reversed course as traders looked to more Fed rate cuts in 2024 at the time.

This time around, we’re seeing traders feel that inflation could be stickier in 2025; not least with Trump tariffs in the picture.

The thing is, recent inflation data has also shown that the disinflation process is easing somewhat. Looking at prior reports, we can see that core monthly inflation has come in at +0.3% in the last four months. You have to go all the way back to July for a +0.2% reading.

According to ING, the run rate for the past four reports will translate to 4% inflation on an annualised basis. That’s not good news if we continue to see the monthly readings come in as such. So, that will be a key one to watch tomorrow.

The expected figure is for core monthly inflation to be at +0.2%.

How does this tie to bonds? The thing is if price pressures continue to point towards the notion that inflation is keeping more stubborn and there’s still Trump policies to factor in, it will be tough to pick a reversal point for yields. 5% might be sooner than we think.