It could have been a lot worse! That’s a great theme for today’s bond market action. Yesterday was the kind of rally where traders buy bonds first and ask questions later. Those questions are typically asked in the form of bond selling on the subsequent day (today). As such, we were well within our rights to expect a pullback today, and we barely got one!
10yr yields managed to end the day only half a bp higher at 2.228. That’s impressive given that the stock market was able to retrace quite a bit more of its move from yesterday and that there were several unfriendly headlines throughout the day. On the other hand, 10yr yields managed to move up to 2.228 after being as low as 2.18 overnight, but I’d argue that the 2.18% had more to do with overseas markets taking their turn on yesterday afternoon’s domestic market movement.
All that might sound bond-bullish, and I suppose if that’s how you want to feel about this, you certainly have justification. And while I wouldn’t necessarily make any cases for today being “bond-bearish,” I would say that both sides of the market will likely continue to be highly susceptible to the right headlines. As for what the right headlines might be? Traders will know them when they see them, and we’ll know it a few seconds later. Until then, there are good arguments to avoid big rallies or sell-offs into the weekend.