Yields - this time is different
We have seen yields move violently over past sessions. The US 10 year is up some 20 bps in five sessions. 1.55% is a huge technical level. Much more interesting however is the rise in real yields. We all remember the surge in yields in Feb/March, but note the big difference compared to present. Back then real yields and break evens rose in tandem as everybody was discounting "good times".
Since August, break evens have done nothing, while real yields have surged. We doubt the 10 year can take out the 1.55% just like that, but the dynamics of the move in yields this time is much more different than what we saw in February. Pay close attention to this as this is "big money" pricing rate hikes...and that matters.
As Citi's Matt King writes today:
"...we think that the idea that tapering is fully priced in is a fairy tale".
Since August, break evens have done nothing, while real yields have surged. We doubt the 10 year can take out the 1.55% just like that, but the dynamics of the move in yields this time is much more different than what we saw in February. Pay close attention to this as this is "big money" pricing rate hikes...and that matters.
As Citi's Matt King writes today:
"...we think that the idea that tapering is fully priced in is a fairy tale".
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