Moderate Weakness. No New Reasons

Bonds lost ground on Friday, but not for any new, overt reasons. At times, weakness coincided with higher oil prices, but we don't love that explanation considering oil was higher on Monday when yields were substantially lower. PPI data is also not a compelling market mover as it came in right in line with forecasts and doesn't look like it will pass much through to core PCE. Given that short term yields rallied (2yr still down 2bps), much of today's volatility could simply be explained by curve trading amid lighter liquidity. In the bigger picture, the decisive selling pressure of the past 2 sessions basically leveled off and now we wait for the next shoe to drop.