While there certainly wasn’t anything surprising in last Friday’s Jackson Hole speech from Fed Chair Powell, much of the market seems to have been surprised by it. Perhaps they were hoping for the message to be delivered in a more conciliatory manner? Bonds didn’t seem too surprised at the time with yields holding well below the highs from the previous 2 trading days. But as the new week began, those ceilings were quickly revisited.
3.126 (call it 3.13) continues as the nearest overhead pivot point. After that, it’s 3.17, 3.25, and 3.33. On the rally side, the previous ceiling at 3.07 is the target.
One possibility is that bonds were actually more inclined to sell on Friday than they let on. In that scenario, the big drop in stocks on Friday helped bonds hide their pain. Now in the new week, stocks aren’t losing additional ground, so bond sellers have their run of the place.
To be sure the the nearly 10bps trough-to-peak in 10yr yields is roughly the same trough-to-peak move seen across Fed Funds Futures–especially in longer run contracts like December and next June.
All that to say: Jackson Hole actually mattered this year. There weren’t any huge revelations, but it was an important reinforcement of the Fed’s messaging. For the record, I am surprised that the market was this surprised.