It's not often you'll see the S&P down over 30 points with less than 1bp of day-over-day movement in 10yr yields, but that's where we're heading out today. Things might have been worse for Treasuries, however, had it not been for the stock selling, which prompted some asset reallocation ahead of month-end (sell stocks/buy bonds).
In reality, both sides of the market are disheartened by yesterday's super strong GDP reading because it drives the point home that Fed accommodation is likely on its last legs. Since the prodigious staying power in stocks is at least mostly a factor of Fed policy, it's no surprise to see them lower. Sure, earnings season and geopolitical headlines might be contributing, but the day's movements have much more to do with a big-picture shift and some month-end frenzy.
Bond markets, for their part, returned to the previously important inflection point of 2.57 in 10yr yields--as good a place as any to approach and digest tomorrow's jobs data. That leaves them roughly mid way between the two important levels: 2.47 and 2.66. We could see either one tomorrow.
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