While today had a chance to kick off the bigger potential volatility expected during the second half of the week, an uneventful reaction to election results and a close-to-consensus ADP report clearly haven’t stepped up to the plate. Investigating and assigning causality to today’s bond market movements is really unnecessary considering no new ground is being broken. Both Treasuries and MBS remain inside their weakest recent levels despite having moved slightly weaker from yesterday.
If you want to stop reading, there’s really not much more to it than that.
Otherwise, here’s some more:
Bonds are bored and waiting for tomorrow’s ECB Announcement. There’s been more and more analysis suggesting the ECB–or rather, Draghi himself–was to blame for October’s mega-swoon in yields and stocks. The theory is that markets saw Draghi as desperately trying to make a case that the ECB was doing enough to stimulate growth, but all the while remaining hopelessly castrated by Germany’s refusal to allow the ECB to directly buy sovereign debt. Ergo, those “global growth concerns” kicked in and markets panicked.
While that may be a bit of an oversimplification of reality, the underlying dilemma of Draghi vs Germany is front and center. Bond markets are intensely interested in every little development in that saga, so it’s no surprise to see another day without anything but safe, range-bound moves. A big beat/miss in ADP and ISM Non-Manufacturing would have been our only chances, and we got neither.