HG vs ZN: How Copper Tracks Bond Yields and Risk Appetite
Copper futures (HG) and 10-year note futures (ZN) move in opposite directions when markets shift between risk-on and risk-off. If you want to understand macro sentiment properly, watch how copper trades relative to bond yields — it tells you exactly how the economy is being priced.
Why Copper and Bonds Move Opposite Each Other
Copper is a growth asset. Bonds are a safety asset. When yields rise, copper tends to rise. When yields fall, copper tends to fall. The relationship is simple:
- Higher yields → stronger growth expectations → HG rallies
- Lower yields → weaker growth expectations → HG softens
- Bonds bid → risk-off → HG drops
This risk appetite signal is one of the most reliable in macro trading.
How Bond Yields Drive Copper Demand Expectations
Bond yields reflect growth expectations. When investors expect a stronger economy, yields climb — and copper demand projections increase.
Growth scenarios
- Rising yields = manufacturing expansion
- Stable yields = balanced copper demand
- Falling yields = slowdown or recession signals
HG tracks these expectations faster than equities.
ZN as a Risk-Off Gauge and HG as a Risk-On Gauge
ZN strengthens in fear-driven environments. HG strengthens in confidence-driven environments. Combined, they create a clean cross-asset sentiment read.
- ZN up + HG down: market is risk-off
- ZN down + HG up: market is risk-on
- Divergence: macro shift coming
This tool works extremely well during major data windows.
When HG Ignores Bond Yields
Copper doesn’t always follow yields. Supply shocks and China-driven demand cycles can overpower the bond connection.
HG breaks correlation when:
- Inventory drawdowns accelerate
- China stimulates industrial growth
- Major mining disruptions occur
- USD collapses or spikes violently
These situations link back to Coppers Fundementals article.
How to Use the HG–ZN Relationship in Trading
You don’t trade the correlation directly — you use it to set bias and confirm whether copper’s trend is real or flimsy.
- HG up + yields up → strong trend confirmation
- HG up + yields down → weak rally, likely fades
- HG down + yields down → risk-off environment
- HG down + yields up → copper-specific weakness
This is one of the fastest ways to read macro context intraday.
Final Takeaways
Copper futures (HG) and 10-year note futures (ZN) give you a direct look at risk appetite. Rising yields strengthen copper, falling yields weaken it, and divergences reveal major macro shifts. If you track HG and ZN together, you’ll understand the true risk tone of the market.