Wednesday, 17 April, 2019
WTI Has Just Fired Starting Gun on U.S. Treasuries Selloff
By Mark Cudmore
The WTI rise has just gone critical for the Treasuries market. Monday was the first time since November that WTI was up on a y/y basis. That will make the inflation impact far more real and see yields climb until WTI turns back negative y/y.
In fact, charting WTI versus the same contract lagged by one year provides an exceptional guide to how U.S. yields will move. The last period where WTI was up y/y for a sustained period was Oct. 20, 2017 until Nov. 13, 2018 and 10-year yields climbed 76bps in that period. The previous episode was Nov. 7, 2016 until May 25, 2017 and that resulted in a 43bps gain for U.S. 10-year yields.
It’s quite clear from the chart below that the opposite situation, when WTI is down y/y (white line below blue line) has seen yields slump.