- 2-year yields -3.3 bps to 2.590%
- 5-year yields -5.8 bps to 2.860%
- 10-year yields -5.9 bps to 2.934%
- 30-year yields -5.2 bps to 3.078%
There's no easy answers for the sudden change in mood in the bond market but it is something well worth noting, as it does relate plenty to the dollar an equities sentiment in recent weeks especially.
The relief we are seeing is quite evident. As the bond selling cools, stocks are starting to pick up while the dollar is also showing some vulnerabilities today.
There are a couple of plausible reasons/narratives that can be argued for the move:
- We are seeing the 'peak inflation' trade settle in with the US CPI report in focus
- Markets have fully priced in Fed hawkishness and is fearing today's inflation report will justify that the move in the rates market has maxed out already
- The deleveraging pressure is cooling off, perhaps with a key data release in the offing
Or it may yet be a combination of all of the above.
If anything else, I would argue that inflation metrics in the next few months are going to be everything. Should they point to signs that we've hit a 'peak' or perhaps plateauing, it may be enough to produce a more push and pull mood in markets. And that isn't going to be easy to navigate through as a trader.