There's a problem in the world of financial market commentary and journalism.  It has to do with man's constant search to find meaning in all things and to understand the universe in a clearly-delineated, cause-and-effect framework.  Why is the sky blue?  Because of the way light refracts through the atmosphere.  Why do birds fly south for the winter?  Depends on the bird, but likely it's an adaptive trait that increased survivability over thousands of years of the birds that didn't end up freezing to death when they happened to stay up north.  And so on...

But sometimes the sky is just blue, and birds just like warmer weather.  OK, well, those examples are probably best left to legitimate scientific explanations, but when it comes to bond markets, sometimes a trade is just a trade.

What's this rant about?  Frankly: THIS.  I sighed so deeply when I saw this, and I was so far up a creek in terms of coming up with something to write about this morning, that it was obviously destiny that I arm you with a few charts that will enable you to brutally dismantle this oil-based argument if it happens to come up at a cocktail party this weekend.

No...  bonds are not moving higher in yield because of oil.  Traders are not perceiving a corner being turned on inflation that then translates to weakness in the long end of the yield curve.  Heck!  If there were legitimate inflation concerns, you'd expect the bond markets that are the deepest in the toilet due to low inflation expectations (Europe) to take some sort of real hit as opposed to making new all time lows yesterday!  (Read that over and over until you're brimming with incredulity!  It's fun...  you'll see.)

You'd also expect the biggest moves of the past few weeks in Treasuries to be related to oil.  Think about it... the biggest moves let you know what's most important, so all we have to do is find those moves, see what else was happening at the time, and voila!   So let's take a look:

Oh wow.  This is unexpected.  It actually looks like the three biggest moves in Treasuries actually had absolutely no positive correlation with oil prices, and in some cases, even had negative correlation.  True, they do move together at times, but of course this can always be the case because all other things being equal, higher oil prices and higher bond yields are possible manifestations of economic strength and/or inflation.  As such, the silly argument makes enough logical sense to make the news, but the only story there is that we're desperately trying to figure out what the hell bond markets care about right now.

Sometimes trading is just trading.  This week has been a great example of that.  The best motivation any bond trader saw was the need to stay nimble in terms of positions or follow the lead of bigger traders making bigger bets.  The biggest trading motivation has been trading itself--not any economic data or fundamental events.  I know just how boring that is, and what a cop out it must seem like from an analytical standpoint, but if you say those same things to the folks at the cocktail party, they'll at least know that you've considered the tidy, logical, cause and effect.  Therefore, they can take you more seriously.  If they don't, show them this next chart:

That chart didn't even really need to know anything that happened this week in order to suggest bonds move higher in yield.  My goodness!  We were talking about this before last week's NFP ("we're at the bottom of that long term trend--yet another risk factor")!  It's not rocket surgery!  Or at least that's the attitude I'm going to have about it since bonds turned out to bounce higher amid a lack of fundamental justification.   You try it now.  Let me know how it goes.

It's not fun or glamorous, but at least you can be a sanctimonious jerk about it this weekend if anyone dares to draw any connections between bond market trends and economic fundamentals.