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US 10-year yields rebound from key support level early in the session

If I had to choose a “chart of the week” I would be tempted by this one.

Keep in mind that it was the bond market that first signaled concern about omicron and has not faltered. Of course, there are concerns about Fed policy and the strict hawkish turn of Powell and other FOMC members.

It’s hard to disaggregate, but this graph is not. It shows that 10-year yields have been reversing the trend since August 2020, when they double-bottomed from the March 2020 closing low and started a long rise that has been consolidating for 9 months.

A fall through the uptrend would threaten August lows, which came amid peak concerns about the delta. Oil has tested these lows before and if we get any signs of a coordinated global increase in omicron cases, we could easily go back to them or (* gulp *) worse.

Everyone wants this pandemic to end yesterday but it seems that the omicron is significantly more transmissible than the delta. This could turn out to be completely wrong, but the positive case right now is that it leads to less serious results. Thus, it could supplant delta and cross the world population without too much damage, especially for the vaccinated.

At the same time, we must avoid wishful thinking. So a chart like this is a great way to manage risk.

In terms of transmissibility, here’s a good thread describing recent data and comparing it to delta. The bottom line is that it seems to be twice as easy to transmit. It seems to me that this will make the containment of China impossible but I would have said that also about the delta variant.


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