Why Interest Rates Don't Have to Keep Rising

Was it really just two weeks ago when the 10-year Treasury yield rose to 3.11%? Three weeks ago that Jamie Dimon said bond yields were headed to 4%? It feels like a long time ago now, after a sharp rally that saw the 10-year rate fall as low as 2.79% before rebounding a bit over the last three days. The political crisis in Italy was of course, the proximate cause of the big move on Tuesday, but to blame this rally just on risk-off would be a mistake. Just as the calls for a 4% yield on the 10-year note represented surface-level analysis, the view that rates should just revert back to 3.1% now that Italy has a government is also surface-level. Here are my thoughts bringing together Friday's jobs report, where things stand in Europe, what that means for the Fed, and then ultimately for the U.S. bond market.

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