Rising too fast! On the eve of the CPI data, U.S. Treasury yields are approaching the key resistance level of 4.5%

The "Trump trade" frenzy continues, with the 10-year U.S. Treasury yield repeatedly breaking resistance levels, leaving only a few defenses before approaching 5%.

Overnight U.S. Treasury sell-off intensified, with the benchmark 10-year Treasury yield rising by 12.4 basis points to a four-month high of 4.43%, just a step away from the key resistance level of 4.5%.

Since mid-September, the 10-year U.S. Treasury has quickly broken through one resistance level after another, from 4.21% to 4.3%, the latter being considered the starting point for the decline in U.S. stocks over the past year. This Tuesday, the 10-year Treasury yield has surged by 80.9 basis points from the 52-week low of 3.62% on September 16.

Lawrence Gillum, fixed income strategist at brokerage firm LPL Financial, stated, once the yield exceeds 4.5%, the resistance level at 4.66% will be the only barrier to reaching 5%.

We are approaching 4.5%, which will be a significant resistance level, and once we break through 4.66%, it is likely to quickly rise to 5%, which would certainly be unfavorable for stock market valuations.

Gillum emphasized that the issue is the speed at which we reach this target and the likelihood of maintaining this level.

The 4.5% level may be the new equilibrium interest rate for the 10-year U.S. Treasury, and with stock market valuations so high, any significant rise in interest rates would make stock prices even more expensive.

Pacific Investment Management Company (Pimco) stated last week that U.S. Treasury yields may once again converge with stock returns, as rising fixed income coupon rates will decrease the present value of corporate free cash flow, thereby impacting stock valuations.

It is worth mentioning that the sell-off in U.S. Treasuries triggered a decline in U.S. stocks, with all three major U.S. stock indices falling overnight, collectively retreating from historical highs, with the S&P and Nasdaq ending their five-day winning streak, and the Dow closing near its daily low.

This also means that the market focus has shifted from Trump's short-term easing benefits for U.S. stocks to concerns about mid-term inflation and growth prospects.

Although U.S. inflation has eased somewhat, the U.S. CPI growth remains above the Federal Reserve's 2% target, and Trump's promised tax cuts and tariffs will push inflation higher. Additionally, U.S. October CPI data will be released this Wednesday