Well, as noted on Monday morning by pretty much everyone on the planet (because this is the narrative now), the dollar is rising sharply, up five days in a row with the BBDXY shooting through its 100-DMA for the first time all year…
…and thanks in no small part to the greenback having resumed its correlation with 10Y yields:
In light of the fact that 3% on 10s went from “increasingly far-fetched” to “reality” (basically) in the short space of three weeks, that’s probably not great news for dollar shorts.
The other interesting thing about this – and I’m just kind of spitballing here in the absence of other notable developments on Monday morning – is that when considered together with the hit metals took on news that Treasury is considering dropping sanctions against Rusal and any lingering bearishness in crude following Friday’s Trump Twitter broadside, you have to wonder if commodities prices might be capped in the near-term.
That, in turn, could limit the rise in inflation expectations and thereby put the brakes on the rise in nominal 10Y yields (crude and breakevens below).
Or if it doesn’t – for example if real yields lead the way higher and if you look at the bottom pane in the correlation chart shown above, the correlation with the (now rising) dollar is of course higher for TIPS yields – well then that’s not exactly great news for equities:
Who knows, fuck it. But all of this seems to suggest we’re living in something that approximates a self-regulating system.
Is that what the line people call “range bound”? I don’t know – I guess we’ll have to ask the CIO of VCAM.