US Treasury Department Building

Key Week for Bond Yields with US CPI on Tap, Nasdaq and IEF at Risk of a Downswing?

Sep 14, 2021

By: Diego Colman


  • The 10-year US Treasury yield has moved aimlessly during the first two weeks of September
  • Despite the recent lack of direction, long-term rates are likely to run higher over the medium term
  • The recovery in yields can weigh on high-flying technology stocks and trigger a sell-off in ETFs such as IEF or TLT

Long-term US Treasury yields have not done much in the first two weeks of the month, moving up and down without any distinctive direction. However, since the beginning of August, the trend has been mildly upward, with the 10-year rate rising from a low of 1.127% to 1.32%. This recovery may have room to run considering how far yields have tumbled since late March. That said, a clear catalyst would be the Fed’s plans to reduce asset purchases. While the central bank’s dovish stance at the Jackson Hole Symposium led investors to believe that the institution would wait longer before withdrawing accommodation, there has been speculation in recent days that the institution may drop heavy hints at its next meeting (September 21-22) that a November tapering announcement is forthcoming.

August CPI data, to be released on Tuesday, could reinforce this theory if inflationary pressures remain elevated and the sticky components, such as rent and health care services, continue to make gains. With this in mind, headline CPI is expected at 0.4% m-o-m and 5.3% y-o-y, from 0.5% m-o-m and 5.4% y-o-y in July, while CPI excluding food and energy is seen at in at 4.3% y-o-y, from 4.4% y-o-y the previous month. Any upside surprise to these forecasts, especially in the core indicator, could weigh on bond prices, accelerating the transition to higher rates (an upside surprise may lead traders to pull forward bets on the timing of monetary tightening).

Regardless of the August CPI report, the 10-year yield is likely to move higher in the coming months as delta-variant fears subside, consumer spending regains traction and the economic recovery stabilizes. At the same time, waning technical headwinds, rising corporate supply and the possibility that Democrats in Congress will use their majority to raise the debt ceiling and allow the Treasury to issue more debt create a favorable backdrop for yields heading into the fall.


While expectations are mixed, most traders seem to coalesce around the theory that the 10-year yield will end the year around 1.7%, about 40 basis points around current levels. In absolute terms, these are not huge moves, but they are still significant for the bond market and high-flying tech stocks with high-valuations. With this in mind, the Nasdaq 100, which currently hovers near all-time highs, appears to be in a vulnerable position and prone to a pullback during the next leg up in yields.

In any case, even if the tech benchmark has an asymmetric risk profile (more downside than upside potential), betting against the index may not be the most efficient way to exploit a rise in long term treasury yields. Another idea would be to short the IEF ETF (iShares 7-10 Year Treasury Bond) (or even TLT). As bond prices and rates move in opposite direction, this ETF could trend lower if long-end yields recover heading into the fourth quarter. As an alternative to shorting the IEF, a trader could approach the strategy through medium-term puts or a put debit spread transaction to reduce the initial cost of the position and limit risk (reminder: buying a put or establishing a bear put debit spread allows the trader to benefit from a stock’s price decline).



Written by Diego Colman, DailyFX Market Strategist

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastytrade content is provided solely by tastytrade, Inc. (“tastytrade”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure for Futures and Options found on

tastyworks, Inc. ("tastyworks") is a registered broker-dealer and member of FINRA, NFA and SIPC. tastyworks offers self-directed brokerage accounts to its customers. tastyworks does not give financial or trading advice nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastyworks’ systems, services or products. tastyworks is a wholly owned subsidiary of tastytrade, Inc (“tastytrade”). tastytrade is a trademark/servicemark owned by tastytrade.

Quiet Foundation, Inc. (“Quiet Foundation”) is a wholly-owned subsidiary of tastytrade The information on is intended for U.S. residents only. All investing involves the risk of loss. Past performance is not a guarantee of future results. Quiet Foundation does not make suitability determinations, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of Quiet Foundation’s systems, services or products.

Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information on this site should be considered general information and not in any case as a recommendation or advice concerning investment decisions. The reader itself is responsible for the risks associated with an investment decision based on the information stated in this material in light of his or her specific circumstances. The information on this website is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. Trading in derivatives and other financial instruments involves risk, please read the Risk Disclosure Statement for Futures and Options. tastytrade is an investor in Small Exchange, Inc.

© copyright 2013 – 2021 tastytrade. All Rights Reserved. Applicable portions of the Terms of use on apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastytrade’s podcasts as necessary to view for personal use.