Treasury market will take yields higher until something breaks in the system – SocGen

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Kit Juckes, Chief Global FX Strategist at Société Générale, analyzes Treasury yields outlook following Wednesday's correction. The bond market – and t

he Dollar – was moving too fast September is often a bad month for risk sentiment . But two years in a row, the pace of the sell-off in Treasuries, and the rally in the Dollar, was too fast and caused an overshoot followed by a correction and period of position adjustment, before a return to fundamental drivers. Will the spike in yields have a lasting impact on some market participants ? Will the speed of the Dollar’s rally trigger a reaction .

This may be just a brief pause while we wait for Friday’s labour market data and next week’s US Treasury supply and CPI data. If the labour market data are strong, pressure will return sooner than it did last year. I still think the Treasury market will take yields higher until something breaks in the system, just as the Gilt market took yields high enough and the FX market took the Pound low enough a year ago, to force change in the UK Government.

 

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