Discussion
Even if long rates don’t conclude their march higher until 500+, the speed of this move is going to make policymakers uncomfortable and they’re likely to step in soon to manage the rise. As such, once Israel-Iran fog clears, with tactical breadth indicators heavily oversold the market is set up for a policymaker-induced squeeze. Post-squeeze, the state of the equity market advance can be reassessed for its durability in the face of the prospect of 500+ UST rates.
Oversold Breadth
Israel-Iran
A key reason for the late day sell-off yesterday was chatter about IDF jets en route to Iran. Nothing came about from it, again proving the danger of social media-driven news flow.
Interestingly, last night Ben Shapiro suggested Israel’s most likely response was to finish the job in Gaza and then ink a deal with Saudi Arabia. If true, that would be a material de-escalation relative to current expectations, and very much in line with the General Frank McKenzie view of the world.