US Treasuries are lower in price, higher in yield this morning. The big equity market rally is probably drawing some money out of bonds and into stocks while firmer-than-expected retail sales are probably contributing. Last, but certainly not least, with the dollar index looking like it wants to retest its 2008 lows in coming months. investors may finally be getting nervous and trimming Treasury holdings.
A pronounced back up in yields will be a dollar negative (as markets will interpret this as a loss of confidence in the US) but modest rises like we are seeing today (up 8 bp in the 10-year to 3.41%) are supportive to interest-sensitive pairs like USD/JPY.
