Originally published by AxiTrader
US 10-Year bonds have rallied to 2.245% this morning. That's the lowest close since November 16 2016, and a full 36 points below the post-election high of 2.6070 just a month ago.
As a safe-haven US Treasuries are bid because of the rise of geopolitical tensions and uncertainty across the globe right now. And last night's meeting in Moscow between US secretary of State Rex Tillerson and his Russian counterpart Sergei Lavrov did little to ease those tensions.
Likewise, rates in the US are also bid after president Trump both said that relations with Russia are at a low and also that he likes "a low-interest rate policy".
But the rally in bonds is also a reflection of the turn in the global data pulse which has not been beating expectations with the gusto it had been doing until recently.
That combination could be sending an ominous signal to stock traders in the US and here at home in Australia.
Clearly the Trumponomics rally in stocks and rise in bond rates was synchronous with the improved global data pulse (here measured by the Citibank G10 economic surprise index).
Recently though while US stocks have drifted sideways the S&P/ASX 200 has had a stellar rally taking the index from around 5680 on march 23 to a high around 5950 earlier this week.
That rally of more than 4.5% leaves the local market dangerously exposed based on this relationship with bonds, the economic surprise index, and even my US stock market proxy - the S&P 500.
As I wrote earlier yesterday’s price action was a hint of what happened overnight with the ASX200 trading an inside day and looking toppish to me. Futures imply a move back toward 5900 this morning while my system suggests 5844.
Here's the chart:
Have a great day's trading.