Looking at the very short run, it would appear we’ve had a lift in sentiment, risk appetites (higher equities, lower spreads) against a backdrop of monetary policy tightening (higher yields, reals, FX), and perhaps some moderation of negative spill-overs from Ukraine/Russia.


That mix is perhaps a tad unusual, but markets vary, and can do what they like in the short run. The test of sentiment in the face of quite substantial tightening will be where reals wind up. At -.51 they are still highly accommodative. +.51 is likely to be another matter.


…as is the implication from an inverted yield curve.

The challenge with commods is that whilst current pricing is not sustainable, especially if reals go much higher, the yield/carry/valuation metrics at these prices continue to rip your face off if you are substantially UW.

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