We all seem to be waiting for rates to matter, leaving the melting up process in equities a similar one for yields. Only a break of 2.38% 10-year U.S. Treasury will change the mood, says Bob Savage, Track Research Tuesday.

Make clear, policy has determined market direction today and for most of the last 8 years, leaving open the question of when that will change as central bankers recede from fear and focus on greed.

Between the BOJ cutting Y10bn in JGB buying, affectionately called a shadow taper, and the PBOC suspending the counter-cyclical tool to cap U.S. dollar/Chinese yuan (USD/CNH) – the USD direction is higher except for the Japanese yen (JPY/USD). Goldman Sachs believes the dollar is set for another "soggy" year despite a hawkish Federal Reserve.

Some will argue this is about rates as the U.S. bonds slip lower overnight despite a dovish Bostic call for 2 rather than 3-4 hikes in 2018. This makes clear the role of both the Chinese and Japanese in setting global policy, with the BOJ curve program feeding the U.S. as China changes the way it manages the yuan. The Chinese focus on holding 6.50 in CNY means something important for the entire Pacific Rim.  

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These are subtle shifts from fear of deflation to the greed of competitive advantage. Mixed with politics, this could be a turning point for volatility.

Witness the cabinet shuffle in the UK where some ministers resign, some refuse the new job and the ability for the May government to make hard decisions gets pushed further into doubt. Theresa May's reshuffle in disarray as Justine Greening quits.

The U.S. government has its own debates about budgets and policy but that may be less in play today with some data and a 3Y auction to fill the time.

We all seem to be waiting for rates to matter, leaving the melting up process in equities a similar one for yields. Only a break of 2.38% 10-year U.S. Treasury will change the mood else we seem destined to touch 2.54% on the next big economic surprise and expect fireworks at 2.63%, the March 2017 highs.

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