Explaining Monday’s Wild Ride in The Bond Market

It was an extremely volatile, frustrating, and downright weird trading day for the bond market. After starting the overnight session near the lowest yields of the year, the rest of the day was dominated by heavy selling. Ask any market expert to predict today’s movement based on a simple inventory of news and events, and a 17bp jump in 10yr yields would be on exactly zero bingo cards. That leaves us to try to piece together best guesses from a laundry list of potential contributors. These are detailed in today’s video, but they include things like the inflation implications from trade policy, budgetary implications (lack of tariff revenue implies Treasury issuance), timid buyers ahead of this week’s Treasury auctions, fear of reduced foreign bond buying, and a general move to cash as traders look for new opportunities created by recent chaos. 

Econ Data / Events

Jobless Claims

219k vs 225k f’cast, 225k prev

Continued Claims

1.903m vs 1.860m f’cast, 1.847m prev

ISM Services

50.8 vs 53.0 f’cast, 53.5 prev

ISM Employment

46.2 vs 53.9 prev

ISM Prices

60.9 vs 62.6 prev

Market Movement Recap

10:01 AM Weaker overnight with more selling early.  MBS down 3 ticks (.03) and 10yr up 6bps at 4.065

10:18 AM Additional losses on “tariff pause” headlines.  MBS down 3/8ths and 10yr up 14.4bps at 4.151

03:40 PM Back to weakest levels of the day after a modest bounce.  MBS down nearly 5/8ths and 10yr up 16bps at 4.165.