There has been a consistent relationship between Treasury Inflation-Protected Securities (TIPS) yields and the Japanese yen (JPY) until recently. The cheaper the dollar, the more the world buys TIPS. Another interpretation is that a higher yen and lower TIPS yields both reflect risk aversion (but I don’t think that is at work here).

Since the Fed shock in early February the relationship has shifted diametrically. That of course is due to fears about the Fed. But this morning’s sell-off in bonds in the midst of a sell-off in equities is worrying. European rates are down (Bunds -2.1 bps) while US rates are up (+2.5), and the whole rise in rates is coming from TIPS. An aversion to US assets arising from concerns about governance could give us a global wave of risk aversion in which there is no refuge in US dollar markets.