Rising yields no obstacle for the risk trade today

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%.

USDJPY daily

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.

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