A break looks inevitable
US 10-year yields have pushed to the upside in the past few hours but they’re still within the recent range.
In the bigger picture though, the series of higher lows approaching 1%, paints a picture of a market getting ready to bust higher.
If Democrats sweep tonight, that move will be tomorrow. Higher deficits and higher inflation are a slam-dunk bet on a Dem sweep and that means higher yields.
That part is straight-forward enough but what’s less clear is how that filters back into the FX market.
In general, higher Treasury yields are good for the dollar, particularly USD/JPY and USD/CHF. But that relationship hasn’t exactly been rock solid in the past two years and especially not during the pandemic.
So I’m inclined to believe that bonds can move without ending the USD bear market. However on the day/week that 1% breaks, expect a kneejerk reaction.