We continue to have a bearish bias on Real Rates because we continue to see limited upside for Nominal Bond Yields in our projected Quad 3 scenario. Recall that Quad 3 = Breakevens ↑, Nominal Bond Yields →, and Real Yields ↓.
All told, investor consensus chased the first major shot across the bow in terms of Phase 2 economic data via the MAY Jobs Report into a Big Lower-High in Nominal Bond Yields in early-JUN, and we suspect they are doing the same into Friday’s JUL Retail Sales and Industrial Production reports.
Neither our economic outlook (i.e. the daily/weekly reporting of Phase 3 should be ubiquitous by late-AUG), nor the likely Incrementally Dovish headlines from the Fed’s Jackson Hole Symposium implies the aforementioned duration plays are going to run away from us here.