US bond yields are marching higher again

The US dollar had 99 problems last week but rising bond yields weren't one.

That's changed so far this week as US 30-year yields have climbed 9 basis points to 4.89% to start the new week.

Of all the risks that the market is concerned about at the moment, the one I think is underestimated is the US deficit. The battle lines over the Republican budget are shaping it up and it's looking like the tax cut camp is going to beat up on the fiscal hawks and there will be a budget deficit of 8-9% of GDP -- and that's before taking into account the possibility of a recession.

The long bond is likely looking deep into the future and doesn't like what it sees. If 30s get back above 5% this week then we might be looking at an ugly picture in US equities.