In a real sense, today’s bond market weakness was nothing more than a continuation of February’s existing trend on steroids. Multiple asset classes had been moving away from risk into the end of January and have quickly been reversing those positions heading into February. Bond prices had been doing a great job of maintaining their footing near the top of the recent hill and today’s extra strong jobs report gave a big enough short-term push to get bonds rolling uncontrollably. In the bigger picture though, this snowball still isn’t very big.
(note: Bunds in red, US 10’s in yellow, SP futures in blue, Oil in orange)
If there’s a technical saving grace it’s that 10yr yields finished the official trading day holding under January 22nd highs at 1.953. If there’s a fundamental saving grace it’s that European risks remain, and February’s weakness still has a chance to have only been about correcting an overdone rally in January (as opposed to the first steps in a bigger-picture bounce toward higher rates).
Many traders are currently looking for opportunities to re-enter bond positions after they see enough weakness. We’re already getting into levels where we could start to see that at the beginning of next week. As such, the first few days will be critical in assessing these technical reentry points. Mile markers in that regard include 1.95, 1.99, and 2.04 in 10yr yields.