10-year Treasury yields are down to near three-week lows
Despite the enthusiasm in equities yesterday - although it seems like stocks can find just about any reason to rally these days - the bond market focus was rather different.
From the highs, 10-year Treasury yields fell by a whopping 18 bps yesterday in a drop to 0.763% and the push lower continues into the new day.
It is now down by another 2.7 bps to 0.736% and that is the lowest since 16 October.
The main verdict seems to be that bond investors are convinced that there isn't going to be massive stimulus on the way considering the election odds now.
It could also be partly related to the virus story but we will only ever be sure of that narrative once the election drama is out of the way.
However, the takeaway for the dollar is that it is being caught in the crossfire between the equities and bond markets currently.
On the one hand, if bonds are signaling that the reflation trade is going to take longer to play out or is perhaps stalled for the time being, that bolsters the greenback.
On the other, if stocks can still prove to be election-proof as they have been recession-proof, the risk fundamentals argues for flows against the dollar instead.
As always, the market will have to pick a side eventually but ever since the pandemic, the old saying of "the bond market is always right" feels a little wayward considering how Treasuries have been 'stuck' since April for the most part.
