As Risk Off sentiment spreads globally, we are seeing the US 10-year yield continue lower, now trading at 2.85%. We are seeing the 10-year yield at levels last seen in September.

In mid-November we warned about yields about to take a move lower as oil was collapsing and inflation was nowhere to be seen. We wrote;

“Given the continuation in oil prices, we ask ourselves when will the market start to realize Fed can´t be tightening as aggressively as (still) priced in…

… is the fact US 5-year breakeven chart (white) continues trading relatively low compared to the US 10-year yield. With Powell speaking later this week, it could be wise revising where Fed’s most important inflation chart trades.”

US 10-year yield broke below the huge 3% level recently and continues trading lower. Note the break of the 100-day average at the 3% level as well as the recent plunge below the 200-day average. These are rather violent moves.

Next big stop to watch is at 2.8%!

Below is an updated chart of the 10-year yield versus the 5-year breakeven rate.

As equities and yields collapse, one asset shines bright today, gold. The yellow metal trades at levels not seen since June. Next stop at the 200-day average.

Source; charts by Bloomberg