BUZZ-COMMENT-What impact U.S. yields above 5%?

Jan 13 (Reuters) - There has been mounting speculation of what domestic impact, if any, a move above 5.0% for the U.S. 10-year treasury yield would have. Apart from the psychological significance, the impact is likely to be felt more within other bond markets, especially given the recent weakness and volatility in UK gilts.

The U.S. markets have been here before. The 10-year yield hit a high of 5.021% in October 2023 but quickly reversed course to plumb lows around 3.7830% by December 2023. The impact on currencies saw EUR/USD dip briefly to 1.0521 from 1.0695 within an up-move but then the EUR's bull trend resumed as U.S. yields came off hard.

The current situation would suggest that the dollar maintains its advantage and that the likes of sterling, yen and euro would weaken with their respective bond markets. The Canadian dollar is also likely to feel the heat of U.S. yields above 5.0% and the current bull run in USD/CAD could extend to levels not seen since March 2020.

Bond prices took another hit following Friday's strong U.S. labor report, which tested an already precarious market.

Looking beyond the payroll data the key for U.S. bond yields and other bond markets will be the fiscal position under a new U.S. administration.

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(Peter Stoneham is a Reuters market analyst. The views expressed are his own)

((peter.stoneham@thomsonreuters.com))