2 weeks ago, as rates plummeted toward the lowest levels in more than 3 years, I began to point out a very obvious caveat to the gains.  Because coronavirus fears were driving the move, it was only fair to expect a noticeable bounce toward higher rates when coronavirus fears began to ebb.  

This is not groundbreaking or deeply insightful analysis by any means.  Indeed, it would be like concluding that if watering a plant makes it grow, that not watering a plant might make it grow less or stop growing altogether.  But there are nuances both to the analogy and to real life in the bond market.

Finance TV personalities often like to quip that "bonds are smarter than stocks."  What they're getting at is the fact that bonds tend to take the big picture into consideration in a more rational way (among other things).  In the case of watering the plant, the green thumbs out there would be quick to point out that too much water can be a bad thing, and that ceasing the watering regimen won't necessarily cause the plant to shrink or die.  That depends on when it will get water again.  Even then, there's a certain amount of time, post-watering that the effects of the water are still showing benefits.  The soil is still moist and the plant is still growing.

It's the same story with bonds and their current pitcher of water: coronavirus fear.  While stocks are trading the fact that the spread of the disease is no longer exponential and hopes of relative containment are improving, bonds are still benefiting from the fallout.  Even if coronavirus were to be completely erased at this very moment, it would still have lasting effects on the global economy.  Bonds care about that.

And of course, it can't be completely erased, so the bond market also continues to benefit from the lingering uncertainty about the path toward containment.

For both of those reasons, bonds have retained more of their coronavirus move than stocks.  That said, the move to price out coronavirus effects nonetheless pulls bonds in an unfriendly direction.