Oil and Bonds – Stephen Roach

In the macro realm, bad things usually come in pairs.  The confluence of yet another surge in oil prices and a long-overdue back-up in bond yields has piqued my interest in that regard.  Crude oil prices are back near $70 and bond yields are at important thresholds — closing in on 2% in Japan, 4% in Europe, and slicing through 5% in the US.  My concerns stem less from a partial analysis of each development and more from the potential interplay between them.  The combined impacts of these two factors raise the odds that a tipping point for an unbalanced global economy could well be close at hand.

I continue to believe that the American consumer is the weak link in the global daisy chain. 

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