Dysfunctional long-term rate markets: next stop for 10-yr US is 1.25%, not 3.75%.

In global risk-on markets, many participants now regard the jitters of late last year, as a bad dream, which did not reflect actual or future reality. 

The optimists now point to the looming US-China deal, Fed “easing”, and perhaps an “orderly” Brexit. Furthermore, data points this week in China and Europe have been “supportive” of the “green shoots” view. 

All of this is unconvincing. A China-US deal is not the magic wand to restoring Chinese and European growth. There have been winners as well as losers, from tariffs. 

We just do not know, whether the pause in rate rises by the Fed amounts to monetary easing. The stance of policy should not be measured by rate moves. It is premature to cheer any Brexit deal.