US Treasury yields are being partly driven by global (ex US) growth surprises
The past few years have also seen a tighter correlation between US Treasury yields and growth surprises from the Eurozone and China. US growth surprises in contrast are not as highly correlated. Developed economy wage surprises moreover do a good job at explaining the structural downward trend in US yields which makes sense given the former’s links with consumer growth and inflation fundamentals.
There is little in the data at present that challenges the US decoupling thesis
Forecasting the future evolution of surprise indices – by definition – is not easy. Still, we think that US growth could surprise positively in the immediate weeks ahead; that global (ex US) growth may continue to surprise on the downside at least for a short time; and that global inflation outcomes will similarly surprise on the downside. That’s rooted in some analysis concerning our surprise indices, PMI surveys and their inventory-related sub-components, and the drop in oil prices.