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The $US & bond yields

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The $US & bond yields

I have read you mention a few times recently your bearish view on the USD whilst bond yields are increasing. Was hoping you could explain in a bit more detail the reason/s these are not currently positively correlating and any catalyst that might change this into 2022?

Really enjoying the subscription.

Thanks, Chris


Hi Chris,

They have indeed been positively correlated for the last 2-years  but prior to that bond yields were leading the $US by around 6-months. We have discussed the above mentioned dichotomy around the respective views a few times in recent months, a couple of scenarios come to mind:

  • Last night we saw US bond yields have their biggest drop of 2021, perhaps the rising inflation story is now built into money markets for the next 3-6 months.
  • Hence bond markets might correct, or just go quiet, which could see the $US recommence its downside move of the last 18-months.
  • Lastly of course we may be wrong and both US yields and $US will rise in 2022.

Importantly also please do remember we are only looking for one final dip down in the $US before anticipating a major trend reversal, this by definition suggests they could be correlated but also towards the end of trends is when the price action generally becomes hard to pick week to week.

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$US v US 5-year bond yield
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