The U.S. and global economies continue to improve, and U.S. bond bulls admit defeat

With the cyclical strength of the U.S. and global economies, the risk of U.S. Treasury yields continuing to rise increases, and long positions are becoming smaller and smaller. Leading indicators point to a cyclical turnaround in the US and the global economy, and current coincident indicators clearly confirm this. The 10-year Treasury yield has been rising steadily throughout the year, and the recent move has been driven by real yields, suggesting that the market is now primarily pricing in higher Treasury yields. Friday’s non-farm payrolls data could challenge that as the job market shows signs of slowing. But the data is unlikely to disrupt the current thread and the consequent risk of rising inflation.