### POV: The move in 10Y US Tsy........>

US TSYS/TIPS: ### POV: The move in 10Y US Tsy yields through 3.00% has been

fuelled by a rise in real yields rather than inflation expectations. Of the

15.1bps increase in 10Ys in the past two weeks, just 2.6bps can be accounted for

by higher 10-year breakeven inflation. The ex-ante real yield is up 12.4bps.

- Higher US real yields point to increasing confidence in US real GDP growth and

belief that the Fed's hiking cycle will continue (confirmed by MNI PINCH).

- The relatively weak move in breakevens is despite oil prices rising and the

10Y TIPS breakevens/WTI 90-day correlation at the highest since Nov-16 (0.47).

- In contrast, the 10-year real yield is breaking decisively higher, and a

weekly close at the current level of 0.92% would be the highest close since

2011. A continued move would mark a regime change in real yields - the range has

been 0.926% and -0.115% since the 'taper tantrum' of 2013.

- This is positive for the USD, with real yields stagnant in Japan and Europe.

It is also negative for precious metals and other yield-sensitive assets.

- Shifts higher in real yields are also bad for emerging markets (as with the

Taper Tantrum), helping to explain recent pressure.