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Falling Breakevens Driving Yield Drop

US TSYS

10Y Tsy futures (TYZ1) last up 1-12+, touching session highs at 131-08 and testing the resistance area at 131-08 /131-30+ (High Nov 19 / High Nov 5) identified by our tech analyst.

  • Now through 1.50% for the first time in two weeks, the move in nominal yields has been led by dropping breakeven inflation: 10Y B/Es down 7.8bp at 2.546%, the lowest since Nov 3 (more than half the nominal drop of 13.9bp).
  • Oil prices, which are historically highly correlated w breakevens, are dropping sharply (WTI <$70/bbl for first time since September) playing a part in this.

Source: BBG, MNI

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