The headline is the recap. There's not much more to it than that. Ever since China stepped in to stem the tide of currency weakness yesterday afternoon, bond markets have been selling-off. It was good while it lasted, but as far as surprisingly potent market-movers go, this particular iteration of this particular market mover has run its course.
If we want to stretch the boundaries of correlation and causality, we could discuss the fact that Retail Sales numbers were slightly stronger than expected this morning and that the previous month of data was revised better by a less-than-insignificant amount. But in reality, there just wasn't much market movement surrounding this morning's data.
The better place to look for supporting actors in today's drama would be the corporate bond market. Once again, new issuance was on the high side, with more than $8bln hitting the street today. When added to the $16bln in Treasury issuance, bond markets had plenty of supply to take down. It's not unfair to assume that the abundance of supply has something to do with the weakness. The case for that gets even stronger when you consider that stocks didn't make the same sort of gains they did yesterday during the initial response to China's change of heart (in fact, they were slightly weaker).
This bounce back is big enough to threaten the recently positive trend and small enough for us to hold out some hope that it's not yet over. Given the fundamentals underlying the price movement, selling seems like a bigger risk at the moment. In other words, if China was what helped rates pop lower, and now the China situation changed in such a way for rates to pop back higher, where's the incentive for rates to resume the trend lower?
MBS | FNMA 3.0 100-10 : -0-08 | FNMA 3.5 103-16 : -0-07 | FNMA 4.0 106-04 : -0-06 |
Treasuries | 2 YR 0.7090 : +0.0400 | 10 YR 2.1890 : +0.0410 | 30 YR 2.8570 : +0.0190 |
Pricing as of 8/13/15 6:46PMEST |