"$187 Billion Into The Sell Vortex": Nomura's McElligott Models What The Brutal Reversal Of The Rally Will Look Like

Picking up where Goldman left off with its warning that while the market is caught in a historic gamma squeeze, "rates continue breaking higher, particularly at the long end, which remains a major counterweight", Nomura's Charlie McElligott begins his note today (available to pro subs here) by observing that one day after the highest 30Y auction yield since the August 2007 quant crash, traders' eyes are again turning to rates as macro can return to a role as primary catalyst after the “Micro Calm” of strong Equities Earnings, where after the UST long-end supply yesterday a growing number are again becoming worried about growing “Hawkish Concern” globally via the still-not-solved Energy / Petrochem supply shock from Iran, where  oil is draining at a record pace through emergency inventories which will soon begin running-dry of molecules and keep then the “Inflation Tail” will truly be alive.

Obviously, the Nomura strategist continues, US inflation remains “too damn high” and is going “wrong-way”, and despite the greatest desires of the new incoming Fed Chair, the rest of world (single-mandate) central banks' potential for actual hikes has picked-up “real Delta,” and it’s beginning to seep into US / Fed pricing, which means that USD Rate Vol (keep an eye on the MOVE index) could be a problem again for Equities at some point in the next month or two, especially when the US economy is already closer to “Overheating” than it is going into “Recession”...