Just yesterday morning, I noted that bond markets may be seeing the light at the end of the tunnel for May.  Indeed, things have been going well enough this week compared to recent weeks.  Even the big financial media outlets are chiming in with headlines such as "Call it a Sign the Worst Is Over in the Treasury Market Selloff."

I wholeheartedly agree that the worst is over... for the month of May!

We have absolutely no way to know what the beginning of June will bring.  Yes, yes, yes, there is just as good a chance that we continue to see resilience and support kick in near recent levels.  And that could indeed set the stage for a more meaningful push lower.  But the important possibility--the one that's not as fun to entertain and that's not as prevalent in the past 2 years--is that May was just the first leg of a longer, more painful journey toward higher rates.

Look, I'm not saying that WILL happen in June.  In fact, I rather it hope it doesn't.  The point is to not be lulled into a false sense of security by the absence of badness.  There are several reasons for this--not the least of which being that some of history's biggest moves have started with the same sort of volatile consolidation after an abrupt move higher.  More simply though, let's take a look at the premise in the article above.  It makes something of the fact that this week is the first advance for Treasuries since April 17th. 

This can be seen in the chart below as the rightmost green candlestick following 5 red candles.  It looks pretty good too!  That is, until you look at the last two examples of 3 or more red weeks in a row.  In both cases, there was a similar cue from the nice green candle, and in both cases, the following week was ugly.  Oh, and of course those green weeks were also both "month-end" weeks that reversed a month-long curse.

Bottom line, things aren't as simple as they seem.  We have heady events coming up in the week ahead with an ECB announcement and NFP Friday.  We should also probably expect corporate issuance to tick back up and apply pressure.  The nice thing about that is that any resilience in bond markets that goes against the grain of data and corporate supply pressure would be a dead giveaway about the willingness for ongoing support at whatever level happens to be holding up as a solid ceiling (or floor, in the case of MBS Prices).

Today brings GDP.  It's expected to be pretty rotten.