The reflation/inflation trade seems to have reached a consensus in the markets. Despite higher inflation prints, rates have struggled to make new highs for a few weeks now and have failed to establish themselves above the 55m ema that has acted as decent resistance/support over the last few years opening the door for a new move lower in rates at least to retrace partially the recent move higher. Watch for the 1.00% area for a target or support area in the next few months.
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As suggested in our original post, the reflation trade reached a consensus and despite continued high inflation prints, yields failed to continue to move higher and to break above the 55m ema and have turned lower since then. Watch for the area between 1.05% and 0.88% as potential target for this move and reassess the overall macro picture.
10 year rates are based upon fundamentals not MA's. Watch for Fed Taper talks in the coming months. Until money the Fed's continued monthly injection of cash is removed or even signalled that it will be removed, money will still flow to bonds. The US is still on track for GDP to be 7% this year, that will send rates to the upside once that data is confirmed and the Fed's plans are underway.