The overnight session was extra quiet for bond markets, with no meaningful movements until after 8am. In hindsight, uneventful was good as the recently vague pressure on rates kicked into high gear after the FOMC Minutes. It wasn’t so much the Minutes release itself. In fact, a case could easily be made for the Minutes being positive for bonds. Rather, it was the stock market reaction combined with the fact that bond markets followed the move.
I won’t pretend that today’s weakness was ALL about stocks, because clearly, bonds were already in the process of losing ground ahead of the Fed. Rather, I would say that the abruptness of the knee-jerk trading after the Minutes was primarily a factor of a significant breakout event in equities markets. Particularly with respect to SP futures (worlds of street-cred vs the plain old Dow), stocks broke an important ceiling right at the moment bond markets did a 180. Here’s that ceiling in near and medium term context.
For what it’s worth, that move lower in August was one of only 2 that big since stocks bottomed out in 2009. Bonds don’t want to misread cues about a big break lower or a big bounce back toward the previous range, if for no other reason than stocks are bought with money and bonds can be sold for money (which will subsequently be used to buy stocks). Granted, that’s a gross oversimplification, but you get the idea. Stock lever in full effect.