Bonds began the day in modestly stronger territory. While they spend a small amount of the day trading a small distance away from those opening levels, that time and distance was never big enough to cause any concern. In short, the “consolidation” we’d hoped to confirm by seeing 10yr yields remain under 2.92% this week has officially been confirmed.
If you’d prefer to approach this from a purely empirical standpoint where we forget that the Fed is a big deal next week and that traders aren’t all robots, we could simply say that a slightly stronger Retail Sales report was offset by weaker performance in stocks to leave bonds to trade in line with opening levels by the end of the day.
Whichever reality you choose to live in, the fact remains that next week has a fairly big say in how we close out the year. In the environment that’s prevailed in recent years, the mid-December Fed week is really the last week of the year. It’s the Fed’s chance to add fuel to the fires of economic concern, or take the less volatile route and douse the flames. Neither eventuality likely has much of a bearing on what happens in 2019, but it will definitely have an impact on certain markets (housing, mortgage, for sure) between now and the 2nd week of January.