Any deep hypothetical analysis of recent bond market behavior requires a caveat about volume and volatility. Namely, we haven’t had any of either of those two things so far this week. Next caveat: that’s either a symptom or a disease.
Most likely, it’s a symptom, meaning that it’s a relatively data-free week before an awesome 3-day weekend (thank you Columbus?) that offers many a market participant the chance to take that quick labor day trip that they missed out on.
If we consider that last Friday’s NFP day saw the culmination of a bull run for volume and that this week has died down quickly AND done so amid a narrowing trading range, a case could definitely be made for the big trades being made last week and this week simply not playing host to any major decision making.
Either that or the major decision making is waiting on today’s FOMC Minutes. Recall that the most recent Fed announcement was somewhat of a shocker in that it was dovish on policy and that Yellen was similarly dovish in her Press Conference. Subsequent Fed speakers have contended that the dovishness perceived by markets belies the true tenor of the meeting. If so, we’ll find out today at 2pm.
Whether or not this would be ‘news’ to bond markets is another matter altogether. I’m not sure anyone really knows what to expect from the Fed right now, or 3 weeks ago, as the case may be.