Bonds focused on technicals, range-trading, corporate supply, and the FOMC Minutes today. It all added up to almost no net change across the board, so I hesitate to read too much into any single development.
The tone was definitely weaker in the morning, volatile in the hour following the Fed, and then stronger into the close. Big corporate bond offerings from Toyota ($3.5bln), Citi ($5.25bln), and a big Australian bank ($3.5bln) were launched in that same hour and likely added to the volatility.
As far as interpretations of the Fed Minutes are concerned, there were two distinct, opposing points. On the one hand, the Fed saw some risk of inflation overheating, thus requiring even faster rate hikes. On the other hand, the Fed pointed out the downside risks associated with a stronger dollar and further said that its more hike-biased stance was dependent on fiscal policies being effective. In other words, if fiscal policies aren’t effective, the Fed’s tone will change. While that’s not too surprising or even that relevant, it was probably the best takeaway today for those trying to reconcile another decent day to begin the new year.
For what it’s worth, I think it’s just as valid to forget about assigning nitty gritty ’cause and effect,’ and simply say that various technical levels have been serving as cues for better buying and selling in bond markets. 10yr yields sold-off right after breaking below 2.44% today and then found their footing right after breaking yesterday afternoon’s high yields of 2.46+.