Tough to bet against the bond market
It was easy enough to dismiss the drop in yields after the FOMC as a short squeeze but a second fall to these levels is a bigger concern.
Maybe these are gyrations around the turn of the quarter but if that's the case, it's unusually large and long-lasting.
The bond market is the best predictor of inflation out there and more-direct measures like 5-year breakevens are falling even faster.
The implication is that inflation isn't coming and that's a sobering message for commodity markets.
If we aren't getting inflation then commodities and commodity currencies aren't a great place to be. What's problematic is that commodities have fallen alongside yields, so the same message is resonating.
What's tough to square that with is economic data. Yes, the ISM services data today was a touch softer than estimates but it was still one of the best reports since it started in 1997. The US is reopened now but pretty much every other country is at least a few months behind. On top of that, there are tremendous amounts of savings yet to unleashed.
Ultimately, I think the reflation trade is still the place to be but the message from bonds can't be ignored. Commodities and bonds can't both be right.