Currencies continue to trade with oil. While I realize this is becoming a repetitive statement, the reality is this is the way it will be until we get some semblance of geopolitical stability, writes Tom Essaye, president of the Sevens Report.
The Dollar Index rose 0.25% late last week, driven by oil prices primarily. But the modest move in the face of a near-6% rally in oil showed the market remains generally unconcerned about an expansion of the war.
Turning to Treasuries, the 10-year yield was also marginally higher early in the day on oil prices. But a solid 2-year auction resulted in the 10-year yield only rising one basis point.
The 10-year yield will trade with oil. But at 4.3%, the 10-year yield is not signaling a warning sign on oil or the conflict. It’s also still not confirming the very optimistic view of stocks.
The bottom line is that, like the dollar, the 10-year yield isn’t signaling a “problem” for markets. It would just be better if it were near 4%, further confirming the move in stocks.
