The week began with a somewhat sharp sell-off.  This followed the steady selling pressure in bonds seen last Friday (albeit after the lowest opening yields in more than 5 months).  With bank failures being the key reason for those low yields and a distinct absence of new bank failure in recent days, is it time to consider the end of this bull run in bonds?  

If one were to base their answer entirely on yesterday's trading, then "maybe."  But let's consider the broader context.  We've had several 24-48hr periods where rates have spiked in similar fashion only to be dragged back down to the new, lower yield range.  Notably, the "new" range is actually also the same old range that we were watching in late January--the one that was ultimately broken by the strong jobs report in early February.

Treasury yields continue to operate in this range, despite a bit more volatility around the highs and lows.  Additionally, the recent peaks in yields (and Fed Funds Futures, for that matter) actually form a trend line leading back down into that range.  While this trend line doesn't predict the future, it does give us a good line in the sand to determine when it's time to truly consider the end of bank drama narrative.  

20230328 open.png

Even after that shorter term line is broken, bigger picture questions will remain.  If incoming economic data is softer, bonds could merely bounce at the longer-term trend line seen in the chart below, and set up for a more serious rematch with the 3.3-3.4% levels.

20230328 open2.png

Today's calendar is more active than yesterday's, but there's still no big ticket econ data to digest.  The 1pm 5yr Treasury auction may be the highlight in terms of scheduled events.  On the non-scheduled front, there's already an active slate of corporate bond issuance to digest (something that helps mitigate the level of concern over this morning's modest weakest).