Looked at in a vacuum, today was merely a so-so day for bond markets. But by the time you consider some of the other factors in play, the outlook quickly brightens. Just how bright, remains to be seen, but it's promising.
The most obvious hurdle for bond market gains was the strong performance in stocks and oil. Both closed at their best levels of the year. While it's not too surprising to see multiple asset classes performing well after a major central bank comes out with a bit of a softer stance, neither would it have been a surprise for bond markets to lose a bit of ground given the pace of improvements in other markets.
Then there's the corporate issuance hurdle. As a reminder, corporate bonds are often hedged by the selling of Treasuries. While these can always be bought back at a later date, the immediate implication is incremental weakness in bond markets, not to mention the fact that more corporate bonds are also adding to the overall level of supply competing for investors' attention.
Finally, on a more qualitative note, there's the simple matter of yesterday being a super strong day for bond markets. That means any sort of ground-holding seen today would have been a victory. The fact that we not only held ground, but did so with a few headwinds seems to bode well for the trading levels defended yesterday. That doesn't mean we're immune from weakness going forward, but it does suggest that we could put up a very good fight in the event that weakness pushes 10yr yields back up toward 2%.
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