The first part of the scenario held up well, until very recently. Indeed, at the start of the year, we were expecting an intermediate recovery to hold above 3.85% on the US 10-year towards 4.60%, before initiating a further easing to 3.26%. Unfortunately, this was without taking into account persistent inflation, which thwarted this fine mechanism. Core CPI for the first quarter came in at +3.7%, well above expectations of +3.4%. At the same time, annualized GDP rose by just +1.6% over the period, against a forecast of +2.5%. This double "kiss cool" effect took its toll not only on equity indices - which continued their slide - but also on bond yields, which continued their advance. Who's the chicken or the egg? My heart goes out to the interest-rate markets, which are reputed to be smarter than equities, which always overreact with a delay.

So, breaking through the 4.60% barrier seems to open the way to the following alternative scenario: "[...] Instead of simply bouncing back towards 4.60%, the market would manage to break through this level, opening the way for a continuation of the uptrend towards 5.27/5.32% (the level from which profit-taking would be expected)". The first support to watch out for to keep the bullish course is at 4.33%, the last bastion before the 21-month moving average on which the market has been holding since 2021, and which now acts as support at 3.96%.

For its part, the German bund also broke above the 2.46% level below which it had been consolidating for a month, thereby reviving the upward momentum. Even so, interest-rate spreads in the eurozone are not particularly wide, proving that traders are not worried about current debt levels. The OAT/BUND is stable at around 50 basis points, while the BTP/BUND is not showing, at least for the moment, any strong signs of tension.