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Real Yields Continue To Support USD, Weigh On Equities

US
  • Today’s sizeable sell-off in 5-10Y Treasury yields comes from a modest ~2bp drift higher in inflation breakevens but the bulk of the lifting comes from real yields (5Y +6bps, 10Y +4bps).
  • In doing so, 10Y real yields of +45.5bps nudge to pre-July 27 FOMC levels and continue to support continued DXY strength.
  • It also weighs on equities, with today’s 1.7% decline in S&P E-minis helping unwind some of recent divergence with real yields (S&P E-mini shown inverted in chart).

US 10Y real yield (white), DXY (green) and ES1 (yellow)Source: Bloomberg

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