Now that the Christine Lagarde press conference is over I just wanted to highlight again the sharp bond moves in response, particularly after Lagarde said the market was underestimating how high rates need to be raised from here. The Italian 2 yr yield is spiking by 36 bps to 3.02%, now about 30 bps below a 10 yr high. The German 2 yr yield is up by 30 bps to 2.43%, a 14 yr high. The spread between the German 10 yr and the Italian 10 yr yields is back above 200 bps, wider by 12 bps today.
Also, the euro is now up on the day at the strongest level vs the US dollar since June. To state my opinion again, the dollar rally ended up solely being an interest rate differential standout and now that the Fed is getting close to ending hikes as others continue to catch up, that rally is over and the dollar’s inherent flaws will be revealed again (largest debtor nation in the world). It’s time to own some non-dollar assets like gold, silver, EM local currency bonds, and international stocks.
Italian 2 yr Yield
German 2 yr Yield
The Euro
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.