It is sometimes argued that a lower oil price is a threat to Treasuries because oil exporters typically save a larger share of their income than oil importers and are more inclined to put their savings into US government bonds. We think the argument should not be overstated. That being said, a lower oil price increases the chances of the Fed tightening policy more aggressively than most expect, which is an essential component of our view that the 10-year yield will climb to 4% by the end of 2016.
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