Bond Trade Yields

Bond Trade - yields  are going up for a couple reasons. Less fear from Europe and a little bit better US data have really extended long duration positions. Lifting the yield. is good for the dollar against some currencies, specifically the yen. The charts shows when the difference between the yields rises, usually driven by u.s. rates, there is a higher dollar against the yen. There is now about 40 basis points as the dollar has lifted against the yen. It is better to borrow yen as markets hit fresh four and a half year highs.

Investors are more optimistic, seeing the rise in equities and decline among prices.  Note there is a lot of duration covering. When we had yen carry rates blew out  to zero and Europe has gone zero. Now yen comes into play again. Bond traders have to get out of safe haven trades now!
 
There is low volatility and ranges could stay when it comes to the u.s. dollar, That is why the bond trade smarts like to fade this. With the liquidity situation ten year yields won't be extending much. Look to sell the dollar and buy the yen - right above current levels and with a tight stop. Expect a move down to 78. but put your stop just above where we are now.

As this is a short term trade be careful holding this position into jackson hole. It is all about low volume, low volatility. Looking at the treasuries yield. there is a high that was broken. Now we are pulling back as it's holding support. Which means the yield  is at resistance. if we look at the dollar yen, we also have a level just like the treasuries are supported. 78.50. That might make us wrong here and could screw up things -which is why we prefer to follow the top bond traders.