As the short covering rally in the bond appears over and the Fed ramps up for more rate hikes, global PMIs and inflation rising, bonds and gold are selling off.
Still highly correlated.
Watch 123.065 and 123.00 as key support on the June T-Note contract. If that level breaks, 2.60 percent on the 10-year will be tested. We think.
We believe the bond market is in a slow bleed bear market.
Though the fundamental value of the 10-year U.S. interest rate should be over 5 percent – 3 percent real rate plus inflation -, global central banks have engineered a massive structural short in the G3 sovereign bond market.
A German 2-year note yielding a -.80 bps with 2 percent plus inflation and more than full employment? That is some reality TV.
We will have more on this later in the week.