As feared, bonds were gearing up for the raft of big-ticket economic data in China overnight. On balance, that data was quite a bit better than expected. The resulting selling spree was thus fairly logical. 10yr yields nearly hit 2.62% before it was over.
It definitely could have been worse. I think part of the resilience is explained by the extent to which bonds have moved to price-in economic stability (or even a rebound) in China. Such a thing would definitely be worth higher yields at home, and the last week of Chinese data keeps the risk on the table. There wasn’t really a big enough reason to justify the size of Friday’s bond sell-off. Combine that with today’s sell-off seemingly being too light and we come to the conclusion that it’s been one big move leading up to today. Sell the rumor, buy the news, etc.
But the real reason the “news” may have been bought, so to speak, would be the rather large plunge in the stock market. This kicked in right at the 9:30am NYSE open and took SPs down more than 20 points peak to trough. While that’s not a huge move in the bigger picture, it was easily the biggest day of selling since March 22nd. Bonds only paid a small amount of attention to it, but it was enough to keep us in mostly-unchanged territory.