USD: 3 Reasons Why Higher USD and UST yields Could Trigger Significant Risk-Off - Credit Agricole

Credit Agricole Research discusses the implications of the current rally in USD and UST yields.
"The UST move has spilled over into other fixed income (FI) markets and we expect this to continue for several reasons: 1) Oil prices remain very resilient and this is already fuelling inflation expectations especially in economies that saw their currencies depreciating sharply vs USD; 2)Strong USD and higher US rates add to the downside risks for the global stock markets as well as local currency FI markets; 3) Attempts by EM central banks to smooth the selloff of their currencies could further push UST yields higher as they are forced to sell their UST holdings," CACIB argues. 
"The above could suggest that a continuation of the moves in USD and UST yields could give rise to significant further tightening in the global financial conditions.
If left unchecked, the tightening may trigger to sharp deterioration in risk aversion fuelling further gains especially against risk-correlated and commodity currencies," CACIB adds.