With the increased amount of data on today’s calendar, we’ve seen increased volatility, but it hasn’t been too threatening so far. In fact, bond markets are currently in positive territory day-over-day despite GDP coming in much stronger than expected this morning (and well-rounded to boot!).
The easiest offsetting factor to point to would be the Consumer Confidence data, which came in much weaker than expected. Upon closer examination, however, we find that the 10am Confidence data didn’t really have much of an impact on domestic bond market momentum. Treasuries and MBS were already bouncing back from post-GDP weakness and with the exception of a few minutes of volatility, are still at the same levels seen right before the data.
So there must be a third variable at work here, and when we look for third variables in the morning hours, looking East tends to be the most reliable bet. That is indeed the case again this morning as core European bond markets broke recent resistance and moved to their lowest levels since mid October. A pronounced bounce in German Bunds around 9:06am correlates with a similar bounce in Treasuries where stocks and currencies do not, leaving us with the clear sense that this morning’s domestic bond market resilience owes much to Europe.