The bond market took an entire day to reiterate what it told us yesterday afternoon. Simply put: it’s not interested in rallying much more than it already had before Wednesday’s Fed announcement. Underlying data and events have been a nonissue throughout this bounce. Bonds have moved higher in yield at their own pace and for their own reasons. The only question is whether we’re just witnessing a quick correction of an overdone response to the Fed or a bigger-picture correction after the Fed response got yields to “trigger levels” for traders to re-set positions.
It wouldn’t be a surprise to see a bit more corrective momentum in June as the first week of July is an insane hotbed of potential volatility. The results of the late June G20 meeting combined with the important economic reports at the beginning of July (all compounded by the market closure on Thursday the 4th) make for the possibility of staggeringly abrupt movement.