Friday was exciting for a short while. Following the weaker-than-expected NFP, 10yr yields briefly broke below 2.27--emphasis on "brief." Friday quickly began looking like a head-fake as Monday opened with bonds in weaker territory. Over the past 2 days, however, the big rally potential has returned.
Yesterday was "nice," but technically not quite enough to say that there was a legitimate attempt to break below 2017's range. That changed today as 10yr yields cruised all the way down to 2.239 this afternoon.
The motivation was the same for both yesterday and today's bond rallies: political headlines. Yesterday was more geopolitical in nature with North Korea threatening a nuclear strike on South Korea and the US. The White House response was the market mover, however, saying the US would handle it with or without help from China and would not "telegraph its moves in advance."
Today's market mover was more domestic in nature, with Trump saying that the dollar was "too strong." This is a pretty big deal. Presidents don't often take such overt stands on market indicators (apart from economic data). An administration that wants the dollar to weaken has multiple tools at its disposal to bring about that change, even if the best ones are indirect (i.e. changing composition of the Fed).
In general, most of those tools would coincidentally benefit interest rates. As such, interest rates quickly responded to the headlines by moving well into the best levels of the year. It's not that markets expect imminent policy action that benefits rates. Rather, it's just another "yeah but" for bond bulls to offer against 2017's conventional wisdom that says rates must go higher.
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