There were a smattering of headlines and events available for bond markets to digest today. If rates ended up moving higher, we could likely find a way to present those tidbits in such a way as to reconcile the bond market weakness. As it happened, rates moved lower.
The bond market strength is fairly logical given the weak economic data, Brexit-related headlines, Treasury/corporate supply considerations, and potential month-end buying. But the biggest factor in play is likely tomorrow’s FOMC Announcement, and bond traders are expecting it to be decidedly friendly.
On the one hand, the last announcement wasn’t nearly as friendly as expected. Shortly thereafter, various Fed speakers came out and said the dovish things traders had hoped to hear/see at the announcement. In other words, somewhere between the December Fed meeting and the subsequent Fed speeches, Fed members got more dovish. Now, it only stands to reason that tomorrow’s announcement would be accordingly dovish.
On the other hand, that same announcement from December serves as evidence that Fed is more than willing to say one thing in speeches and another in the official announcement. Bonds better hope the Fed is as logical as the average bond trader this time around.