There was more than a shred of hope in the overnight trading session as bonds were able to make modest gains despite slightly stronger stocks and another jump in oil prices. At the start of domestic trading, however, bonds lost ground heading into the 10am hour with both Treasuries and MBS turning negative.
While they managed to recover somewhat, the weakness serves as a reminder that there won’t be any easy victories if bonds are to avoid getting pushes back to the weaker levels seen in recent weeks. Indeed, there’s little to pin those hopes on apart from global catastrophe. On that note, the
For those who are nonetheless interested in holding onto hope, there’s still a way to view yesterday’s mega sell-off in the context of a broader downtrend in rates. Granted, it’s hard to make a compelling case for a strong continuation of this trend without World War 3, but the trend is the trend until it’s not.
In timely events, markets actually deigned to respond to this morning’s ISM data, albeit only slightly. After that, a slightly more dovish read on today’s Powell testimony possibly added to the recovery in bonds. The caveat is that stocks were falling at the same time, so it could be as simple a “risk-off.”