The notion of contrarian indicators is pretty interesting when it comes to the bond market, at least when it comes to investor sentiment.  I take part in my fair share of sentiment surveys and have had a few occasions to talk to the strategy desks that conduct them.  In a moment of analyst to analyst candor, I was once told that most trade desks use such surveys to find out what the masses are likely to do so they can advise the opposite.  Granted, that's a bit of an oversimplification, but the important point is that there is opportunity in identifying a pervasive belief.

As I discussed last week, as long as there was a pervasive belief that bond yields were too low and "had to" bounce soon, the rally could continue as savvy investors would continue to force the hands of less savvy investors who bet on rates bouncing.  We've seen these pain trades play out several times since then, all the while against the backdrop of headlines that continued arguing for an imminent rate bounce.

Now we're seeing headlines like: "The bond market has been spooked and so the big interest rate slide is likely not over."  Hi! Welcome!  This would have been a great headline for last week.  Seeing it today makes me a bit nervous.  Granted, it's not necessarily representative of investor sentiment, but if more and more market participants begin to believe yields should go lower, that's when they'd be more likely to bounce.  Contrarian indicators!

As it stands, we just made new cycle lows today and ended 4.4bps lower.  It's going to take at least 1-2 days of more concerted selling before it makes sense to reach out for the knife and expect to grab all handle and no blade.