We have been noting that a 10 year break even rate of around 1.6% was the line in the sand on a continued ‘inflation trade’ after the bounce. The 10yr b/e has broken below it. But one need not try too hard to imagine a potential Inverted Head & Shoulders with the right side shoulder possibly being constructed now. It could extend down to 1.4% like the left side did.
In line with this, the daily view of the above indicator’s fellow, the TIP-TLT ratio, is in a bearish stance.
While nominal TLT, usually a risk ‘OFF’ asset, is looking bullish.
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