There's no way to be excited about bond markets right now! That is, unless you want to be excited about the fact that things are making great sense. It's all very much like an ideally warm bowl of porridge, but with no salt, sugar, or whatever else people put in porridge to make it less bland and boring. In short, bond markets are boring, but logically so.
That's a matter of debate in the longer term. Popular talking points include:
1. Bond markets underwent much of the volatility associated with tapering and coming to terms with improved economic data before we had tapering and improved economic data. Now that we do, we're all dressed up and nowhere to go.
2. It doesn't make great sense for yields to go stampeding lower while the amount of bond buying taking place is reduced or reducing from what it was when the bond buying was taking place in full force.
3. Nor does it make great sense for yields to go stampeding lower while economic data is at least tepid and possibly improving
4. But neither does it make great sense for yields to go stampeding higher when they've already moved up a solid 50-100bps since the taper tantrum began
5. And when the so-called economic recovery remains extraordinarily uneven with excessive job creation in lower-wage occupations, increasingly uneven wealth distribution, and an ongoing, deep-seated, extraordinarily profound level of economic and emotional shell-shock still working it's way through the financial system (read: cash-hoarding, and balance sheet building combined with a generally lower-than-expected willingness to lend and hire) and the consumer population.
Taken together, there are ways to be optimistic about the economy right now and just as many to view it as fragile and uneven. It's not an environment that's conducive to significantly lower rates for obvious reasons but it's clearly (it's clear, right?) unable to sustain any major push higher in yield. So what's there to do in such a situation but grind ever sideways? Check and mate to "the range." It makes perfect sense.
Of course, things must eventually change and when they do, it will either be a precipitous event that brings about the change (like Europe did in 2010-2012) or bond markets will end up looking like 2003-2007.
For now, the order of the day is even more narrow and uneventful: assessing the 3-month range between 2.6 and 2.8. Given all the events on the calendar yesterday, were bond markets able to shake things up very much in the context of that range?
No, no they weren't...
The "nice" thing about this lack of significant movement is that--JUST like the logical explanation that exists for the larger-scale movements, there's an equally logical explanation for how yesterday went down.
Conclusion: this market isn't interested in making big, unjustified moves, but it is interested in this week's economic data, and after today, it's getting the biggest single piece of data there is.
Today's data isn't something to shake a stick at though (unless it's a stick of respect and consideration). The biggest potential market-mover of the bunch is ISM Manufacturing at 10am.
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