Bonds lost ground early in the overnight session before buyers stepped in to defend the new multi-year highs in yields across the curve. Japanese investors remain heavy net sellers of US bonds, but that’s not exclusively responsible for the weakness. In fact, if we factor out the pace of the initial selling, yields are perfectly in line with last week’s trend–perhaps even a bit lower as domestic trading gets into full swing.
In the slightly bigger picture, current levels are fairly central in the most recent uptrend:
That’s unpleasant to see, but not too hard to reconcile given the elevated supply environment (Treasury auctions + big corporate bonds) all on a holiday-shortened week with tomorrow bringing another installment of what may be the most important monthly economic report (CPI) as far as the bond market is concerned.