The bond market has a lot on its mind right now.  2019 is proving to be very different from other episodes of big, protracted rate trends.  In most past instances, we can point to 1 key theme driving the momentum, with a few occasional supporting actors.  Things are more complex and nuanced this time around as the usual suspects for rate inspiration seem to be taking turns in the driver's seat.

This week (and perhaps last week, to some extent), Brexit is definitely in control.  News of a new potential deal hit bonds overnight, but we bounced back after subsequent news that it would have a hard time getting enough votes to make it through Parliament in a special session this Saturday. 

Much of the brexit-related volatility was playing out right as this morning's economic data hit.  Was this another instance of Brexit overriding the influence of US econ data (which is what happened yesterday morning)?  Not really...  This time around, the data wasn't as important as yesterday's Retail Sales report.  Beyond that, several of the reports had significantly mixed internal components.  For example, construction numbers were weaker than forecast, but single-family construction gained ground.  

The net effect was a relative absence of movement in the morning hours and bonds traded a range near their recent highs.  A progressive bond market rally into the closing hours of the European session helped bonds hit their best yields by mid-day.  Stock selling didn't hurt.  After Europe closed, however, US bond yields bounced back to higher levels, right in the middle of the morning's range.

Today's overall damage was minimal, but bonds' willingness to fly a holding pattern at the highest yields in a month makes it look like traders are contemplating a technical breakout to even weaker levels.  Based on how the market has been behaving over the past 2 days and what we know of this weekend, the best guess is that it's up to Saturday's Brexit-related developments to cast a vote on the bond market's ability to bounce in a friendly way or to break-out to even higher yields.