The recent market discussion has shifted with more and more traders arguing and position for a multi-decade regime shift that is already underway. Everyone I speak to thinks that the central banks' transitory inflation narrative has lost all credibility and means they are getting badly behind the curve.

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Sill, there is clear geographical divergence. In Europe, there are essential growth and inflation headwinds as wages could remain much more muted than in US/UK. Hence, most of the street thinks the ECB will stay dovish and not hike rates in 2022.

With the majority of macro focus on rates, FX has been a bit of a sideshow as it has been highly problematic holding views and generating alpha. 

The FX consensus remains dollar long, coupled with expectations that at some point interest rate differentials will have to trigger enormous volatility - it just has not happened yet. Still, it might be just around the corner, especially if the Fed finally blinks.

Many investors (and major central banks, too) are worried about market fragility, as rates markets seem to have become unhinged, with prominent hedge funds of systemic importance. It is getting to that time of year when commercial banks are generally unwilling to provide sufficient liquidity under most circumstances. Buckle-in could be a ruckus-filled few weeks.

The US Treasury market was disorderly after Wednesday's US October CPI print - partly because of the strength of the data itself because different investors had other ideas and because liquidity was poor. 

The 10-year yield ended Wednesday at 1.55%, up 11bp on the day, which is the textbook kind of result one might have expected. But a few hours later, the nominal yield gained only slightly – a surge in breakevens offset by a slump in the real rate, i.e., TIPS.

Indeed, this could be the start of the regime shift as real money investors changed their view to far more sustainable inflation and strapped vast amounts of long-term inflation protection, hence forcing TIPS yields down. It was not until those trades ran their course that the CPI influence on reals – Fed policy - started to push through.