By: Kent Engelke | Capitol Securities

For the first time since 2014, the yield on the benchmark 10-year Treasury is topping 2.7%. The selloff less than a month into 2018 has sparked many calls of a prolonged bear market.

The last time the 10-year yielded three percent was at the end of 2013 and when the Federal Reserve made its movements shift to QE tapering, only later to end up increasing QE which in turn caused the 10-year yield to drop in yield by almost half in about 13 months.

This week, I think the Treasury selloff could either accelerate or abate. As noted yesterday, President Trump gives his first State of the Union Address tonight. Typically, Treasuries sell off following the address given the speech is historically filled with increased government spending.

Later in the week is when the FOMC releases it latest policy decision. No change in policy is expected, but all think the post meeting statement will include a rate hike that is imminent in March.

And then there is Friday’s jobs data. What will the statistics suggest?

Finally, the Treasury announces its quarterly refunding plans. As noted many times, net Treasury issuance is expected to top $1.3 trillion, the greatest amount since 2009.

I can argue that if all the above indicates strength, a 3% 10-year Treasury yield is all but assured.

Historically, bond and equity prices move in tandem, defined as lower bond prices typically dictate lower equity prices. I do not think that it is different this time.

This week is also a significant week for earnings. The top technology, drug and energy companies will post results. Commenting about energy, the discount between crude and the price of energy equities is at an all-time record according to Merrill Lynch. In the same vein, but on the opposite end of the spectrum, technology valuations are near or at record levels.

Is a change about to occur?

As noted, this can indeed be a significant week.

Last night, the foreign markets were down. London was down 0.68%, Paris was down 0.48% and Frankfurt was down 0.59%. China was down 0.53%, Japan was down 1.42% and Hang Sang was down 1.09%.

The Dow should open moderately lower as the global selloff in sovereign debt is accelerating, a selloff predicated upon growth stronger than expected. Maybe dogs still chase cats and cats still eat birds as the millennial old relationship between Treasury and equity prices is still valid. The 10-year is off 5/32 to yield 2.71%.