When the World Health Organization declared coronavirus an international health emergency yesterday, there were two schools of thought.  At first glance, it should have been good for the bond market as the announcement seemed to indicate things were getting worse.  But bonds fairly quickly began moving in a counterintuitive direction.  The only explanation at the time was that the declaration paved the way for the international community to more effectively combat the disease.  The only other explanation was that traders were using that news as cover to get early month-end trading accomplished. 

We closed out the day yesterday without a clear answer, but that changed in the overnight session as bonds gained ground steadily.  By the time the stock market opened, we were already on a roll.  Then the weaker Chicago PMI data hit and only strengthened the case for bond gains.  In a final flourish, another wave of month-end bond buying hit just before the 3pm CME close, taking 10yr yields to 1.503 and MBS to their best levels since 2016.

It was interesting to see just how willing bonds were to react to econ data in an environment that's seemingly so focused on coronavirus headlines.  That's a good reminder about next week, which brings several of the month's biggest economic reports.