Oil vs Yields

by Ashraf Laidi
Mar 10, 2017 19:58

We know that bond yields and oil generally move in the same, but sometimes the relationship breaks down as it did in last Nov-Dec due to powerful USD rally surging with yields to the extent that it dragged down all commodities-including oil. Today, yields' outperformance relative to oil has reached key levels with the 10-yr yield testing crucial resistance and US crude oil (WTI) at important confluence support.

Click To Enlarge
Click To Enlarge
Oil vs Yields - Oil Yield Mar 10 2017 (Chart 1)

Considering that the Yield/Oil ratio failed to break above the neckline of the inverted H&S formation and is presently heading lower, this could mean yields will break out and oil breaks down, neither breaks but yield retain the relative upper hand, or both pull down (yields fail to break higher but oil breaks down).

If oil weakness remains and/or extends, then the reflation trade would be seriously disrupted, especially if yields fail to make any marked gains above inflation rates. Several scenarios could play out, yet, it's important to keep an eye on 2.60-5% resistance on the 10-year and the $47 support in WTI. An oil break below the latter should inevitably prevent yields from pushing higher, forcing yen traders to closely follow the extent to which yields react to energy. Will cover this in more detail in next week's Premium video after examining the intermarket reaction to the Fed decision/outcome.  

 

More Hot-Charts

  • Silver, Gold & Broken Records Chart

    Silver, Gold & Broken Records

    Apr 20, 2017 13:08 | by Ashraf Laidi
    We may have started to sound like a broken record with our repeated stance in favour of silver over gold over the last 6-9 months, via our numerous bearish takes on the gold/silver ratio.
  • Saudi Tadawul Participation Chart

    Saudi Tadawul Participation

    Feb 20, 2017 11:28 | by Ashraf Laidi
    نسلط الضوء على اهمية نسبة المشاركة في المؤشرات من خلال عدد الأسهم التي تجاوزات متوسط ال 200 و 55 يوم. و مشكلة القمم المنخفضة ليس فقط في مؤشر التداول السعودي و لكن أيضا في نسبة المشاركة.
Hot-Chart Archives
Comments (Showing latest 0 of 0) View All Comments