Last week's story was simple: unknowns and risks surrounding omicron prompted traders to shed risk by selling stocks and buying bonds.  Unfortunately for fans of low rates, this week's story is just as simple, but in the opposite direction.  It's not that Omicron is no longer a risk--just that it's not proving to be as damaging as initially feared.  Things could change, but until they do, bonds face more challenges.  "Supply" is compounding the situation as the scheduled Treasury auction cycle is met with elevated corporate bond issuance this week.

On a somewhat positive note, the combination of supply and the bounce in stocks should be having an even more deleterious effect on the bond market.  This can be seen in the chart below as stocks have recovered much more of the recent omicron-related move than bonds.  On a potentially negative note, we could also view this as a sort of warning that bonds could be vulnerable to more weakness in the coming days.