BLBG: U.S. Real Yields Signaling Weakness May Deal Dollar Punch Blow
Chart weakness presaging lower real U.S. yields may offer another body blow to the dollar that is already hurting from the Federal Reserve‚Äôs meeting minutes that showed members were concerned about currency appreciation.
Inflation-adjusted yields on 10-year bonds in the U.S. have now broken out to the downside after a month of consolidation. That would typically spur the yen, which has a negative correlation of 0.94 with inflation-adjusted yields.
On the charts, focus on the 10-year U.S. real yield, now around 0.35 percent, shifts to 0.30 percent and then 0.21 percent, with the latter representing the 61.8 percent Fibonacci retracement of the move from July to December.
The rejection of the 50-day moving average on the upside earlier this month reinforces the outlook for real yields.