Investors face a triple threat that in the past have been consistent with trouble, economist Mohamed El-Erian said Monday. Those daunting factors entail a jump in the 10-year Treasury yield to its highest since the early days of the financial crisis, oil hitting its peak of the year, and a pronounced move up in the U.S. dollar. “Historically, those three things happening break something ,” El-Erian, the chief economic advisor at Allianz and president of Queens’ College Cambridge, said during a CNBC “Squawk Box” interview. “They tend to break something in the financial system, and the market concern is that we haven’t even finished with interest rate risk.” US10Y YTD mountain 10-year Treasury yield – YTD The U.S. bond market was closed Monday for Columbus Day. El-Erian said the violence in Gaza might temporarily send investors looking for a safe haven in Treasuries. Yields rise as prices fall. Despite the likelihood of more bloodshed following the Hamas attack on Israel, markets overall remained relatively calm, with stock market futures down less than 1% and oil up more than 3%. “The big question for the markets and for the economy is whether you get escalation,” El-Erian said. “If you look at the way we’re trading right now, it is a somewhat higher risk of escalation, but not significant.” “This is what you get when you have geopolitical tensions. This is what you get when growth is insufficient. And this is what you get when you get policy mistakes,” he added. “So it’s another unthinkable that has become reality.”
