Rising yields no obstacle for the risk trade today

Read full post at forexlive.com

Treasury yields are at the highs of the day but that’s no obstacle for US stocks. The S&P 500 is nearly back to unchanged after falling by more than 40 points a few hours ago.

In FX, the dollar remains strong but is giving a bit back in the past hour. AUD/USD has tracekd up to 0.7213 from a low of 0.7199. That will likely help to keep the three candle reversal highlighted earlier from closing below the key 0.72000 level.

I don’t put much fundamental underpinning behind the moves in anything today. Retail sales were dismal and the UMich survey is a bad economic indicator. Meanwhile, oil seemingly can’t be stopped and that’s one reason to sell bonds.

Jamie Dimon got some attention for saying that he thinks the Fed could hike 6 or 7 times this year but I don’t know if anyone is re-evaluating their trades based on his prognostications.

Ultimately, I think you have to go where bonds take you. Zooming out, the recent dip in 10-year yields is barely a blip on the radar and it’s increasingly likely this is a real break of 1.77% and on the way to 2%.

How do you want to be positioned when that happens? Normally it’s a boost for USD/JPY but it could come with a significant hit to risk assets, particularly the Nasdaq, so I’m not sure that’s the trade.

I’m open to ideas here but the simple trade might be the right one: short bonds.