Long-End Bonds in Structural Bear Market: 3-Minute MLIV

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00:00The long end of the bond market is certainly getting our attention then, Mark.

00:02When it comes to Japan, also feeding into Treasuries, though.

00:0630-year Treasury yields we see down by seven, eight basis points right now.

00:11U.S. stock futures, to Quiti's point, pointing higher.

00:14They were higher on trade narratives, but maybe also higher then on expectations of slightly lower yields.

00:22Yes, I think there's two different aspects here.

00:24First of all, I think the price action in the bond market, despite the fact it's a very sharp rally,

00:29is very worrying for bond investors.

00:31It shows kind of how nervous this bond market is and how low the liquidity is.

00:36You know, we always say about stock markets, the bear markets see the most powerful short-term rallies.

00:40And now we're seeing that in a bond market.

00:42And I think it confirms the fact that we are in a structural bear market for long-end bonds.

00:46I do not know how long this kind of relief rally in bonds will last.

00:50It may last for days or even weeks.

00:52But it is quite worrying.

00:54And I think that we're going to have much higher yields again later on this year

00:56because it shows this is a market that is very nervous around the bond market,

01:00even if they got over their skis.

01:02Now, we are seeing the fact that equities are rallying in the short term.

01:05Is that because we're getting lower yields?

01:06Or is that just, again, a little bit of the low liquidity relief rally on the fact that Donald Trump,

01:12you know, reverse decision on EU tariffs has delayed the kind of imposition of 50%

01:17and said that trade talks are accelerating, you know, in the fast-track program.

01:21So I think it's more just low liquidity.

01:23We're over-interpreting that signal.

01:25I expect that later on this week that we'll resume the Sell America trade.

01:28Whether it starts before the NVIDIA earnings or not, I don't know.

01:33Mark, latest thoughts on the dollar?

01:35Christine Lagarde thinks this is the euro's moment.

01:37I think we shouldn't over-interpret kind of her point.

01:45I mean, it's true.

01:46The dollar will be in a long-term downtrend now.

01:49The world is overexposed to the dollar.

01:52Dollar share of global reserves at the end of last year was 57.8%.

01:56That will probably fall to below 50% in the next coming years.

01:59We've been in de-dollarization for the last few years.

02:02It's just very, very subtle and gradual.

02:03This is not about the end of the dollar.

02:05The dollar will remain the world's reserve currency.

02:07It's just about reducing exposure.

02:09So we're in a long-term dollar decline.

02:11However, the euro is not going to surpass the dollar as the world's reserve currency.

02:15The dollar is firmly entrenched.

02:17It's just about a smaller share of dominance.

02:20But, yes, of course, the euro will benefit from that de-dollarization.

02:23It will be one of the many currencies that will benefit from the fact that we are in a structural dollar depreciation trend.

02:29But that does not decide the short-term trading.

02:31And, in fact, the very short-term price action, again, suggests that FX traders, the short-term traders,

02:35have got too bearish of the dollar.

02:37We might get a bit more of a squeeze in the very short-term.

02:39But people will sell rallies aggressively in the dollar.

02:45Very quickly, where is your dollar going by the end of the year?

02:50It's going to go to 1.30 before 1.06.

02:53But, you know, in the timeline, will it happen this year?

02:56Probably not quite this year.

02:57But I think that the next 10% move in euro dollar is higher, even though the last 10% was also for a higher move.

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