Tankers hit in Hormuz: oil and the 10Y at 4.79% jump, and I step off the peso long

Good morning!

Overnight, the bond market made the noise that equities kept to themselves. Two tankers struck in the Strait of Hormuz pushed WTI to 88.14 (+2.78%) and lit a global rout in duration: the US 10-year jumped to 4.79%, its highest since January 2025, with Japan's 10Y at 3% (a level unseen since 1996) and the German Bund also at 3%.

Hormuz lights the fuse under oil and rates

The sharpest move sits in bond vol, not stocks. MOVE climbed 5.46 points, nearly double a normal day. The VIX added just one point to 15.92 and S&P futures are off 0.67% —real nerves, contained ones. It's the curve pricing the geopolitical scare while equity holds its ground.

The line I drew Friday got crossed

Yesterday I held the peso long and was explicit: shift to neutral if the 10Y closes sustained above 4.75% or the pair clears 17.16. This morning the yield printed 4.79%. An overnight tick is not a confirmed close, granted — but with the entire global curve repricing at once, this doesn't read like a one-off.

I said I wouldn't defend the call out of stubbornness, so I won't: I'm pulling the pro-peso bias and standing flat. The awkward part is that I'm walking away from a trade that's working. The currency opens at 16.9750, firmer, shrugging off the exact rate-and-oil move that should be dragging on it.

The tug-of-war that argues for no side

The 20-day peso-to-10Y correlation sits at +0.41: the textbook says higher US yields should soften the currency. It isn't happening, and that's my open question this morning. Positioning helps explain the resilience: Chicago specs were net long 82,382 contracts as of August 25, a cushion that absorbs selling attempts.

Against that floor push higher crude and a yield that no longer flatters the EM rate premium. I read it as consolidation between the 16.8781 floor and the 17.0669 ceiling, with the Banxico–Fed spread still holding the base. This neutral stance breaks toward the peso on a close below 16.88, and I look back at the dollar above 17.07 with the 10Y firm over 4.80%.

The road ahead

The calendar won't settle the fight today: Mexico CPI on the 9th, the ECB on the 10th, US CPI on the 11th. Until then, crude and the bid for safety along the curve call the tune.

Risk On slips from 57 to 55, still in CONSTRUCTIVE territory: equities and carry hold the composite up, while jumpy bond vol and Bitcoin at 77,991 take some of the shine off.

— See you tomorrow for Wednesday's view.