UST 10-year yields touches 2.885% in early trading - up 3 bps
Japanese markets were closed for the day, so the first glimpse of the cash market today for US Treasuries are now upon us in European trading. Treasury futures were trading lower earlier as pointed out here, so the jump in yields at the open is not totally surprising.
If yields continue to breakout as Treasuries trade lower, that will certainly start weighing in on equities again - despite the positive signal from the futures market.
Equity traders may be starting to get used to the higher bond yields at this stage, and that could see markets "stabilise" a little - but I reckon we won't see investors be as complacent as they had been in the equity rally over the past year. That time has probably passed, and we're in a new trading timeline.
But talks of interest rate "spikes" by budget director Mulvaney could help accelerate the move in yields towards 3% and that will reignite the whole equities rout again - and then flows will start coming back to government bonds and bring yields back down, as we have seen last week.
It's a reaction that counteracts itself, but ultimately sooner or later, something's gotta give.
