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Treasury yields are generally following the pattern of past interest rate cycles, but with a larger term premium keeping the curve steeper than usual.
The dollar’s early 2025 decline was a reflection of a global rush to hedge accumulated USD exposure, not a mass exodus from US assets. With most hedging now complete, currency moves should again follow fundamentals, setting the stage for a tactical USD rebound in the months ahead.
Commodity market breadth would need to improve for it to signal bullish conditions for the aggregate commodity complex. We maintain a defensive tilt within commodities, favoring precious metals over the more cyclically sensitive energy and industrial metals.
Despite concerns about fiscal sustainability, a rise in term premia, and attacks on central bank independence, monetary policy remains the primary driver of bond markets. In our Q3 Review & Outlook, we update our views and identify opportunities in government bonds, short-term interest rate futures, global yield curves, inflation-linked bonds, and credit.
We remain cyclically short Brent but are tightening the stop loss to $73/bbl to guard against a geopolitics-driven upside break.
Monetary policy divergences are re-emerging. We rely on BCA’s Central Bank Monitor to assess the current policy stance of major central banks, and highlight the tactical opportunities across bond markets and currencies.
