In a surprising turn of events, US 10-year yields have skyrocketed by 13.3 basis points, nearing the crucial 4.35% level. Market analysts have observed a potential rough head-and-shoulders pattern forming on the chart, which could have significant implications if a break above 4.35% occurs. The measured target from this pattern suggests a yield of around 4.65%.

The recent price action appears to be driven by Federal Reserve Chairman Jerome Powell's comments on Friday. Powell emphasized that there is no urgency to cut rates, causing market participants to adjust their expectations. As a result, the market is now pricing in only 65 basis points in rate cuts this year, down from the initial estimate of 80 basis points following the Federal Open Market Committee (FOMC) meeting. Moreover, the chances of a rate cut during the June meeting have decreased to 58%.

Another factor contributing to the surge in yields is the ISM manufacturing survey released today. The survey indicated higher prices paid, adding to the upward pressure on yields. However, some experts argue that the news surrounding the survey and the slightly cooler PCE (Personal Consumption Expenditures) report on Friday might not fully justify the significant increase of 13.3 basis points in yields.

Analysts are now speculating whether the rebalancing in the market ahead of the quarter-end or ongoing cash raising efforts may have suppressed yields in the previous week or if such funds are being deployed into riskier assets like equities in the new quarter. Additionally, concerns have been raised regarding the Bank of Japan's buying activities and the strong China Purchasing Managers' Index (PMI) released yesterday, with potential implications for global inflationary pressures.

As the situation unfolds, market participants are closely watching the technical indicators for guidance. However, it is worth noting that the impact of higher yields extends beyond Treasury bonds. If a breakthrough occurs, it could potentially squeeze USD shorts and disrupt crowded equity trades, leading to substantial market volatility.

Investors and traders alike will be closely monitoring the developments throughout the week to assess the potential consequences of the surge in US 10-year yields. The overall market sentiment remains cautious, as the outcome could have far-reaching implications for various asset classes.

Disclaimer: The information provided in this article is based on publicly available sources and does not constitute investment or trading advice. Traders and investors are urged to conduct their own analysis and make informed decisions. The article acknowledges the risks associated with foreign exchange trading and advises seeking advice from a financial or tax advisor before investing.