Thursday, August 7, 2014

At the Break Zone in Yields

Despite indications of short-term momentum and sentiment extremes, 10-year yields continue to follow the arc of the 1994/1995 rate tightening cycle and are currently hovering around the break-zone of the May 28th lows. 

Broadly speaking, the current dynamic has maintained pressures on the equity markets, specifically the critical financial sector - which exhibits a positive correlation with 10-year yields over the long-term. Conversely, gold and the precious metals space should continue to benefit from the unwind in long-term yields that were stretched at a relative historic extreme coming into the year.