Judging from the copper / gold ratio, there may be plenty of room for US bond yields to rise.

With 10-year u.s. bond yields hitting 1.75% at one point in intraday trading on Thursday, they are at their highest level since January 2020. There has also been a new round of heated discussion on Wall Street about how high US bond yields can rise next. At this time, some people in the industry are once again looking at a copper / gold ratio, which used to be regarded as a leading indicator of US bond yields.

Financial blog zerohedge suggested in an inventory article on Friday morning that if the copper / gold ratio is correct, U. S. bond yields may have plenty of room to rise.

David Scutt of (Ausbiz TV), an Australian financial television station, also tweeted after the Fed's decision this week that the copper / gold ratio still shows the risk of a sharp rise in benchmark yields. He compared the copper / gold ratio with the average yield on 10-year Treasuries in the US, Europe and China.

The logic that the copper / gold ratio can guide the yield of US debt is very simple: the copper / gold ratio is the quotient obtained by dividing the price of copper by the price of gold, that is, gold removes the industrial attribute and obtains the pure financial attribute.

When the market economy recovers or warms up, copper will outperform gold because it reflects increased demand. This is also similar to the current rise in US bond yields as a result of economic recovery and inflation expectations. Although the influence of the copper / gold ratio is not absolute, it occasionally sends the wrong message. However, taking into account the long-term trend, the copper-to-gold ratio will still be of great help in predicting 10-year Treasury yields.

It is worth mentioning that copper / gold ratio has also been a favorite bond market leading indicator for dual-tier capital CEO and "debt king" Ganglak (Jeffrey Gundlach). Mr Gunrac said earlier this month that 10-year Treasury yields might now be close to 3 per cent if they were based entirely on the copper-gold model.

Copper for delivery in LME peaked at $9617 a tonne in February, the highest level since August 2011 and up more than 15 per cent from the start of the year. Gold prices have continued to fall since hitting an all-time high above $2000 in August last year, falling below the $1700 mark at one point earlier this month.

Next, will US bond yields further accelerate to catch up with the rising copper / gold ratio? At least in some investment banks, expectations are already more radical. Deutsche bank strategists predicted on Thursday that the yield on the 10-year bond would rise as high as 3% if inflation grew faster than expected.