(Washington)

Whether one likes it or not, Treasury yields hitting 3%, which they look bound to do, will be a major event. The big question is what to do once it happens. Is it the signal of a sharp move higher in yields, or will it be the climax to a short-lived selloff? The reality is that if Treasuries move just a little above three, there could be a strong wave of selling. However, strategies betting against volatility have been paired back in recent weeks, so the selling might not be as furious as one might fear.

FINSUM: Nobody has any idea what will happen if Treasuries move above 3%. As far as bonds, we expect that there will be more and more organic buyers above 3%, which should keep things in check. On the stock side, we do not see why a move higher would be too bad, as the spread to equity yields will still be wide.