One day before the Federal Reserve's meeting, the 10-year US Treasury Yield spiked to its highest level in more than a decade.
The 10-year yield rose as much as 6 basis points before paring some of it's gains.
The 10-year yield has not traded above 3.50% in almost two years. Several EU countries were on the verge of insolvency as a result of the European debt crisis.
After the European debt scare, interest rates went down as the Federal Reserve loosened monetary policy and implemented a number of quantitative easing measures.
The punch bowl is being taken away from stock market investors by the Fed as it reduces its balance sheet in hopes of cooling the economy. Most expect the Fed to raise interest rates another 150 basis points before the end of the year.
The Federal Reserve is expected to raise its interest rate by 75 basis points on Tuesday.
The 10-year Treasury yield is likely to go upwards according to Fairlead Strategies founder. A surge to 4% is imminent, according to a Monday note from Stockton.
The target is 4.00%. The counter-trend signals would be stopped out if the opening print was above 3.51%.
Fixed income securities are seen as an attractive alternative for investors as interest rates rise.
Given the low amount of risk being assumed, short-term yields are expected to hit 4% before the end of the year. It's especially true during a time of high uncertainty, like the Russia-Ukraine war, and worries about a recession.
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