Additionally, the Industrial Metal Commodity Index closely follows the Chinese Credit Impulse by 15 months. A temporary consolidation in the recent commodity breakout is most likely to soon occur if the historic correlations continues (see chart to the lower right).
WHAT IS THE FED AFRAID OF?
On Friday the 10Y UST note closed at a yield 1.20%. The yield is now up 300% from one year when it put in a 0.40% low!
This is a serious loss in capital for those who accepted the risk of low yields for the protection of US Treasury assets. Meanwhile Real Rates in US Treasuries were the highest in the world one year ago and recently were one of the lowest. Money follows real rates just like water flows downhill. This has hurt the US dollar but this is changing and the Fed has yet to act to stop the rise in US Treasury rates?
Without Fed intervention the dollar is likely to soon react positively. A strengthening dollar has traditionally been a 'damper' on Commodities and could weaken over-valued US asset pricing. The Fed appears to want to take some exuberance out of an overheated US equity market!