In the amusement park that is financial markets, each asset class has a few favorite rides. When the place is packed, it’s tough for any given asset class to take too many turns on any given ride within a certain amount of time. A big old rally is the bond market’s favorite ride, but an ample supply of warm bodies at trade desks often serves to limit how often they can take that ride without good reason.
But the theme park was much less crowded today as warm bodies are increasingly out of the office for an extended weekend thanks to an early close tomorrow and full closure on the 4th. Shorter lines means those left in the park have their run of the place. Even if this wasn’t the underlying motivation for today’s gains, it definitely made those gains bigger than they otherwise would be (see this primer for more background).
Underlying motivation is a tough sell today because the best case to be made is for Bank of England president Carney’s dovish speech. The catch is that British markets reacted to that speech almost completely before US Treasuries even began to move in the same direction. So sure… if you step back far enough to ignore the minute-to-minute comparisons, you might conclude that Treasuries were led lower by British yields, but it’s really hard to prove that scientifically once the microscope gets involved.
Either way, none of the gains changed the bigger picture, wherein yields have been range-bound between the same highs and lows since Fed day (June 19). That will likely change after Friday’s NFP if not by tomorrow afternoon. If it changes tomorrow, however, it would require ADP and ISM to come out weaker than expected. Otherwise, yields would likely retreat back into the prevailing range to wait for NFP on the other side of the holiday.