Brutal Day And For The Scariest Reasons

Despite a slightly stronger start and initial promise of resilience in the face of higher oil prices, bonds bounced nauseatingly higher starting around 10am. Oil prices do a fairly terrible job of explaining the bond weakness, even though oil moved a few bucks higher throughout the day. So what moved markets? That's the scary part: there was no obvious intraday catalyst. The fact is that a lot of traders have decided to sell a lot of bonds very quickly. As obvious as that sounds, we're referring to a staggering uptick in volume as well as average volume per minute. Today, it resulted in roughly 3.8m 10yr futures contracts. Contrast that to Friday the 11th when volume was "only" 2.8m contracts (the prevailing range for the past few months has largely been 1-2m). This is the kind of price action we have in mind when attempting to define undefinable concepts like "repricing of risk."