Bond markets were weaker today. The story of that weakness really begins in the middle of last week when Wednesday and Thursday saw successive moves to unexpectedly low levels.
Before that, 2.47 was a lower bound in terms of 10yr yields. All things being equal, it was a good candidate to bookend a trading range heading into this week's important events, but it was convincingly broken, giving way to lows just over 2.40 on Thursday.
Last week, we spent a good amount of time discussing two of the important market movers behind the unexpected strength: month-end buying and the generally pervasive "short-covering" that's added fuel to more than a few recent moves lower in rate. Both of these things are finite considerations. One of them adheres to a schedule and the other one is more enigmatic.
While we still can't know exactly how many traders who'd been betting on higher rates were forced to cover those bets (by buying bonds) last week, we can see that there's not currently a short-covering boost this week. Combine that with the absence of of month-end support (because it's June now) and bond markets faced an uphill battle regardless of data.
Then when we throw data into the mix, things just get worse. Bonds might have managed a relatively flat day at weaker levels today had this morning's ISM data not been re-reported at stronger levels after a data error affected the initial release. In a nutshell, the initial read on ISM was our only friend today, and the recall/revision turned that friend against us.
The result was a moderately brisk bout of selling. Interestingly enough--with respect to the notion of 'undoing' some of last week's temporary factors--we're right back at the levels seen before those temporary factors are thought to have kicked into high gear. Hopefully that means we have a better shot of holding sideways here.
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