There has only been one story today for domestic bond markets, and that’s been European bond markets! They tanked after one of Germany’s most widely followed economic reports (ZEW investor/analyst sentiment survey) came in MUCH stronger than expected. The following chart of German 10yr yields vs US 10yr yields tells most of that story.
Bottom line, today was definitely not just another casual move in Europe. US markets may be hesitant to take part in this for two reasons. First (as you can see in the chart), Treasury yields have already been holding in higher relative territory. Second, and more importantly, we have Fed Minutes coming up at 2pm. Markets aren’t eager to make any big, unplanned moves ahead of events with that sort of market-moving potential.
If the Fed Minutes don’t “save” bond markets today, this move in Europe is the single biggest threat we’ve seen to our chances of seeing 30yr rates in the high 3’s or 10yr yields in the 2.2’s any time soon.