Something is badly mispriced in the bond market, and almost nobody is talking about it.
WTI crude rallied to $99 on Friday — on track to close at the highest level since July 2022. The 2-Year Treasury yield, one of the most reliable real-time gauges of Federal Reserve interest rates, is at 3.92%.
The last time oil traded at these levels, the 2-Year was above 5%.
Today, there is roughly a 100-basis-point gap between the current yield and where recent history suggests it should be.
Everyone’s Watching Oil. The 2-Year Yield Is The Real Threat.
John Roque, technical analyst at 22V Research, flagged the divergence in a note published this week
His argument is pointed: oil is getting all the attention, but the 2-Year yield is the instrument that will ultimately do the most damage.
“Right now, oil is ‘public enemy #1’, but I think it’ll ultimately be the US 2-Year Treasury Yield,” he wrote.
Roque’s near-term target for the 2-Year is 5% — the top of a range …
