US 10-year yield up 10 basis points
Who wants to own government paper yielding 1.89% when you can own stocks that are up 0.9% today alone on trade news?
Risk assets are jumping today on trade deal hopes and that means that safe-haven assets are under pressure. The 10-year note yield is up 10 basis points to 1.89% today to the highest since November 13.
The conundrum that markets will eventually face is this: Rising borrowing cots will hurt US corporate profitability. However I don't think that's a problem until at least 2.5%. However it will be a problem for utility-like stocks sooner and we could see some jitters on a break of 2.0%.
The clearest FX trade on rising yields is USD/JPY. The pair has extended to fresh highs at 109.30 from 108.60 before Trump's trade tweet.
Note also that the euro is at the London session lows at 1.1117. The euro is increasingly seen as a funding currency and even with German 10s up 6 bps today, it's not getting a lift.
