Last week it was a lack of confidence in the dollar that undermined US bond prices. Today it is strong economic data that is undermining them. It would stand to reason that at some point strong economic data would trump sliding dollar-confidence but we are a long way from that point at present.
A catalyst for the market to shift its dollar view would be a change in tack from Washington. With huge policy proposals which will increase the government’s share of the economy to (relative) peace-time highs, projecting trillion dollar deficits for years to come, any move to trim those aspirations would go a long way toward boosting confidence in the dollar.
Just crossing the wire are the results of the latest 2-year note auction. The bid-to-cover ratio has 2.94, meaning there were nearly $3 in bids for each note on offer. $40 bln were sold at 0.94%