Categories: Base Metals / Energy / General Market Commentary / Precious Metals
Topics: General Base Metals / General Energy / General Market Commentary / General Precious Metals

The Most Important Bond Trendline Is Broken: "Now It Gets Interesting"

The Most Important Bond Trendline Is Broken: "Now It Gets Interesting"

Last week we showed that the 10Y was on the cusp of breaking out above the most critical trendline of this decade. Well, following today's largely illiquid surge in the dollar and selloff in the Treasury complex, briefly halted by the steller 7Y auction mid morning, the trendline has been officially broken.

​Now, as a trading desk put it, "is when it gets interesting." As RBC's head of cross-asset strategy Charlie McEliggott summarizes today's move, "the duration unwind continues." More: 

             
 "Messy move higher as the DXY breaks-out to new 13-year highs on continued strong US data (esp Durables print).  $/Y goes full ‘stop hunt’ mode into peak pre-Holiday illiquidity, currently +170 pips as well (pounding table on that long Nikkei trade FTW) while the EUR breaks down, contributing to UST yields trading dysfunctionally higher / curve steepening.  As such, classic risk-parity pain-trade ensues-- developed mkt sovereign bonds, stocks, EM, credit and commodities (ex-crude) all under the cosh right now at the same time (shocker--a strategy built on a core concept of ‘negative correlation btwn bonds and risk stocks’ is going to be exposed in a regime change of this magnitude).  

His forecast: "Next stop: 10Y UST yields at 2.50 and then nothing until 2.90 (overseas buyers noting both levels before any ‘dip buying’ consideration) and 30s at 3.15, then 3.26 per RBC Macro ninja Mark Orsley."

To continue reading please click link http://www.zerohedge.com/news/2016-11-23/most-important-bond-trendline-broken-now-it-gets-interesting