06.01.2022
Factor watch - US real yields
US real yields have risen aggressively in the first few days of the new year.
Real rates are arguably the most important barometer to watch across all financial markets with huge implications for risky assets.
There are “good” rises in real yields – reflecting improved economic fundamentals. And there are times when rising real yields are “bad” for risk appetite as they tighten financial conditions.
Determining good from bad is typically a function of the speed of the move & the level relative to historical norms. The chart below shows 10y US real rates in z-score terms.
Real rates are arguably the most important barometer to watch across all financial markets with huge implications for risky assets.
There are “good” rises in real yields – reflecting improved economic fundamentals. And there are times when rising real yields are “bad” for risk appetite as they tighten financial conditions.
Determining good from bad is typically a function of the speed of the move & the level relative to historical norms. The chart below shows 10y US real rates in z-score terms.
It has taken just 3 trading days in 2022 to take real yields back above their long term trend.
The current move is still small relative to other big macro shocks. 2013’s taper tantrum was a 4 standard deviation event on Qi; March 2020 posted an even bigger swing from initial lockdown to Fed policy response.
That notwithstanding this is a sharp move & one which, should it continue, would threaten risk appetite across global capital markets. Qi users can track shifts in the same z-score terms via “Top 10 Driver Macro Shifts” in the top corner of the Qi portal’s home page.
The current move is still small relative to other big macro shocks. 2013’s taper tantrum was a 4 standard deviation event on Qi; March 2020 posted an even bigger swing from initial lockdown to Fed policy response.
That notwithstanding this is a sharp move & one which, should it continue, would threaten risk appetite across global capital markets. Qi users can track shifts in the same z-score terms via “Top 10 Driver Macro Shifts” in the top corner of the Qi portal’s home page.
