Bond markets got the 3yr Treasury auction out of the way today. While it was noticeably positive for Treasuries, it was the least potent of the 3 in terms of market movement potential. 10’s and 30’s are yet to come in the next two days. Along with big corporate bond issuance, this available supply is part of the rationale for the current level of hesitation in bonds, but probably not the biggest part.
There’s a two way race for the biggest contributor to that hesitation. It’s between Europe and the technical realities of the recent rally. Those realities are quite simply refer to trading levels having become overheated in January, relative to the pace set during 2014. In other words, rates fell quickly and could simply be moderating.
The European considerations include the upcoming 2 days of meetings, first with the Eurogroup tomorrow and then a full EU Summit on Thursday. The only important thing to know about these meetings is that they could yield a more concrete conclusion on the Greece situation. Please note: at this point, the biggest risk we face is that there’s some magical happy ending for Greece and the EU, especially one that includes ECB bond buying. That would seriously damage the gloomy long term outlook for Europe–something to which we owe a good amount of domestic bond market positivity.