Based simply on trading levels, today is pretty ugly. But in light of the extremely low volume, we were already largely prepared to discount such swings. Treasury volumes are less than a third of the norm and there’s no reason to believe they’ll pick up. It’s sad to see the extent to which various voices are shouting out causal relationships between anything that’s happening in the news and market levels. Sure, maybe the extension of the tax breaks has a minorly salubrious effect on equities or negative on bonds, but out of the 8bps increase in 10yr yields, we might be willing to part with half a bp for such a thing.
In volume this low, it’s the agenda of the minority that moves the stack and evidently the agenda is to sell. Folks can only speculate as to why… lightening positions before year end? Technical retreat to 2.04? Options market January expirations? Snowball selling? And heaven forbid, headlines and data? (that last one is a stretch). The point is that volume and price movements don’t lie, and what little volume there is just does not line up well with any newswires and price swings. End of conversation.
All this having been said, what if the market drifts aimlessly sideways at current levels and encounters TRUE justification for current yields between now and the time volume picks back up?! Well… Bond bulls would be pretty much outta luck, at least for that moment in time. Here are a couple longer term charts to depress you heading into a festive holiday weekend. Have a safe and happy 3-day weekend and we’ll see you next Tuesday.