Overnight events amounted to nothing more than noise for US bond markets. Tough talk from European Central Bank President Mario Draghi did more to help European bond markets earlier in the overnight hours, but Treasuries improved somewhat. The bigger disruption came after China’s central bank announced a rate cut. Whether or not the disruption was warranted is another matter.
Headlines with words like “surprise rate cut” and the like have understandable shock value. It certainly sounded like big news at first and markets responded that way at first. But the announcement was quickly qualified as something less dramatic than the headlines suggested (WSJ summed it up well with the headline: China Rate Cut Surprises, Doesn’t Overwhelm).
Treasuries were weaker at first, but never went higher than yesterday’s highs. By the time MBS opened, there wasn’t much weakness left for bond markets, and we’re now at the best levels of the day.
ALL of this so-called “movement” isn’t really going anywhere though–at least not yet. 10yr yields continue to be “two point three something” and have been for almost every waking moment in the month of November. My biggest concern now is that I won’t have anything to write for tonight’s recap because nothing is really happening or changing, and there are so many ways to write about bond markets being flat. That said, there are far worse concerns to have–especially when rates are at their best levels in nearly a month.