(Bloomberg) — With Treasuries heading in the correct direction for his or her worst month this yr, a hefty slate of auctions looms as a serious test of whether yields have peaked after reaching the best levels of 2024.

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Investors are bracing for a tricky week, even beyond the possibility of further volatility resulting from tensions inside the Mideast. The market must absorb a combined $183 billion calendar of two-, five- and seven-year note sales — the first two of which is perhaps at record levels — before an important inflation reading at the highest of the week that might help shape expectations for the Federal Reserve’s path.

There’s already a strong indication that investors wish to purchase after yields surged this month on signs of a resilient economy, which led traders to push out bets on Fed interest-rate cuts to late 2024. The most recent leg of the Treasuries selloff briefly pushed the two-year rate above 5% after Fed Chair Jerome Powell signaled last week that the central bank is in no hurry to ease policy.

Now that 5% level looks identical to the magic number for bond managers trying to find to put to money to work briefly maturities. For Jack McIntyre at Brandywine Global Investment Management, the message from Powell reinforces the sense that a bottom may be in for Treasury prices.

“A Fed that sticks to their guns and says, ‘We’re going to interrupt inflation,’ means there’s a top in yields,” the portfolio manager said. “Yields will spike higher if the Fed backs off too soon and cuts.”

‘Almost There’

The two-year note ended last week at about 4.99%, so Tuesday’s auction has a likelihood to accumulate a coupon of not lower than 5% on the maturity for the first time since last yr. Before then, investors hadn’t seen such levels in greater than a decade.

“A 5% coupon on the two-year auction is possible, we’re almost there,” said Michael Cudzil, a portfolio manager at Pacific Investment Management Co.

“The market has taken out quite a few cuts and it’s inside your means at this cut-off date for an honest range of outcomes,” he said. Pimco has been adding more interest-rate exposure, with a preference for the front-end and the five- to seven-year area in Treasuries, he said.

In truth, there’s the possibility that yields keep climbing across the curve toward the peaks of October, when yields on some maturities eclipsed 5%.

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Read more: Vanguard Warns 10-Yr Treasury Yields Risk Jump Back to 5%

That’s where Friday’s report on the private consumption expenditures price index, the Fed’s preferred inflation measure, is out there in. The knowledge is projected to point the annual rate rose to 2.6% last month, from 2.5% in February, which could suggest progress toward the Fed’s 2% goal has stalled. Traders are on notice after March consumer-price data came in hotter than forecast.

Still, there’s ample evidence of demand emerging. Last week’s 20-year auction, which brought yields on the second-highest level on record, was well received. And the most recent client survey from JPMorgan Chase & Co. showed investors were net long on Treasuries by essentially essentially the most in several weeks.

Investors also pay attention to that the return of a 5% two-year coupon last yr presented a buying opportunity. The yield subsequently dipped below 4.15% in January since the market bet on rate cuts as early as March.

And while traders now expect the Fed to attend until the fourth quarter to cut, the likelihood of not lower than some easing this yr suggests there’s scope for price appreciation within the brand recent two- and five-year benchmarks.

“The two-year is attractive around 5%, despite being lower than bill yields and the stronger-than-expected CPI prints, since the Fed’s base case continues to be to cut rates,” said Priya Misra, a portfolio manager at J.P. Morgan Asset Management.

Bond investors see one other potential source of demand for two-year notes at 5%: money market funds. The pile of cash in these funds tumbled inside the last weekly data, dropping below $6 trillion, a move that was likely related to tax payments.

But since the two-year rate approaches bill yields that are currently closer to the Fed’s 5.25% to 5.5% range, retail investors may begin to see the appeal of locking in these levels until 2026.

“The strategy of shifting from money to some an element of fixed income probably goes in stages and starts with a move into shorter maturities first,” said Brandywine’s McIntyre.

What to Watch

• Economic data:

  • April 22: Chicago Fed national activity index

  • April 23: Philadelphia Fed non-manufacturing index; S&P Global US manufacturing and services PMI; latest home sales; Richmond Fed manufacturing index and business conditions

  • April 24: MBA mortgage applications; durable goods orders; capital goods orders

  • April 25: GDP; advance goods trade balance; initial jobless claims; retail, wholesale inventories; pending home sales; Kansas City Fed manufacturing activity

  • April 26: Personal income and spending; PCE deflator; U. of Mich sentiment survey and inflation expectations; Kansas City Fed services activity

• Fed calendar:

• Auction calendar:

  • April 22: 13-, 26-week bills

  • April 23: 42-day CMB; Two-year notes

  • April 24: 17-week bills; two-year floating-rate notes; five-year notes

  • April 25: 4-, 8-week bills; seven-year notes

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