Last night I mentioned that the apparent relationship between oil and bonds would not hold and today you are seeing this with oil off 2% while bonds are unchanged. This is happening because of the Chinese rate hike. China is perceived as the marginal buyer of oil and so any slowing in their econ lowers oil prices. China also accounts for a large portion of current economic growth so any weakness reduces global growth estimates. So in today's action oil is weakening because of the slack economy while bonds are acting like they anticipated the weakness. Oil appears to have been mispriced rather than bonds in this case and it is probably going to see a large adjustment compared to the move in yields.
Expecting the Chinese to eventually hike rates was a no-brainer given their need to slow their economy. I will consider the mass selling of base metals that came out of China last week as insider selling and be on the look out for it as a future indicator.
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