US MARKETS CALL: Invasion Of The Bond Vigilante Algorithms

I. Credit

Last week's events confirm our "Proceed With Caution" call in September 15's QuickTakes. The main event was the jump in the 10-year US Treasury yield above 5.00% to an intraday high of 5.22% on Friday (chart). At the end of the day, it closed lower, at 5.18%, after news that Iran proposed reopening the Strait of Hormuz and ending fighting in the Middle East war. The Wall Street Journal subsequently reported that President Donald Trump has told his staff privately that he’s skeptical that Iran will meet his demands and that the US likely will launch a renewed bombing campaign after the November midterm elections.