GLOSSARY · DIVERGENCE
TOCI
Treasury-Oil Crosswind Index
DEFINITION
A composite index quantifying the tension between oil-driven inflation expectations and recession-driven yield compression. Higher scores indicate stronger crosswinds — meaning oil and Treasury markets are sending contradictory macro signals.
Components & Weights
Yield-Oil Divergence
Directional mismatch between crude oil price moves and 10Y Treasury yield moves. Divergence = conflicting inflation/growth signals.
Breakeven Stress
Deviation of TIPS breakeven inflation from its 6-month average. Rapid moves signal inflation expectation instability.
Curve Signal
Treasury yield curve shape (2s10s spread) relative to oil price direction. Inversion + rising oil = maximum crosswind.
Macro Context
ISM Manufacturing PMI relative to 50 threshold. Below 50 + rising oil amplifies the stagflationary crosswind signal.
Score Interpretation
| Score Range | Signal | Interpretation |
|---|---|---|
| 0–30 | Low Crosswind | Oil and yields moving consistently; macro signals aligned |
| 30–60 | Elevated Crosswind | Conflicting signals building; watch breakevens |
| 60–100 | High Crosswind | Severe macro contradiction; stagflation risk elevated |