Rates'n'Risk - Part I

Deep dive into the rates market and its application to Macro

I treat rates as the market’s primary “state variable.” If I can explain what the front end is pricing, what the curve is doing, and whether the move is being driven by real yields, inflation compensation, or term premium, I can usually explain the rest of the macro complex. Equities, FX, credit, commodities. Most of the time they’re reacting to the same underlying repricing, just with different sensitivities and different lags.

The problem is that most rates commentary is either too academic to be useful in real time, or too headline-driven to be repeatable. So this first note is my attempt to formalise the way I read any rates move daily, weekly, or around an event, using a handful of lenses that keep me honest. The objective is not to predict every tick. It is to identify what the market is actually doing, why it is doing it, and what would have to change for that read to be wrong.