There’s a hint in the headline. ‘Nominal’ is a funny word because even dictionaries can’t seem to decide if it connotes deficiency or sufficiency. Star Trek fans might recall “all systems nominal,” and infer sufficiencydeficiency argument. However, due to the latin root “nomin” or “name,” as well as some dictionaries offering definitions that include “in name only.” deficiencysufficiency is probably most in tune with the soul of the word. More to the point, it’s a bit open to interpretation. If bond markets are fighting a nominal fight, and considering the etymological debate above, we could either conclude that MBS and Treasuries were “sufficiently resilient,” or resilient in name only. The latter is closer to the truth.
All that to say: bond markets rallied and sold as little as possible in order to keep pace with Euros and Bunds today. Once European markets closed, there was some spillover money that benefited both stocks and bonds, but that benefit was only made possible by apallingly low volume. The response to Cyprus has been deceptively large in terms of the ongoing focus paid to the topic. The last 4 days of market movement have been very nominal indeed (moving in name only), because of how professional US bond markets have become at trading an EU panic event.
Flashback: Monday morning in Asia. Cyprus news hit and Treasuries immediately moved to THE EXACT SAME RESISTANCE THAT PREVAILED ALL WEEK! Monday afternoon’s high yields were the highs of the week! Game over! It was DONE, THEN, black and white, clear as crystal! Very very very simple ifs and thens… Either Cyprus blows up the whole Eurozone or it doesn’t. It’s a yes or no answer, and we’ve been waiting inside Monday’s range ALL WEEK for an answer. We don’t have an answer yet, so we’re still waiting, and we’re VERY tired. It’s almost insulting to look back on the past 4 days and think that anyone pretended any of it mattered. Truly, the fight was perfectly nominal.