Our friends from Japan might have something to do with it
US Treasury yields usually move in tandem with interest rates and rate expectations. It's never a straight forward correlation but a rule of thumb nonetheless
Trying to short bonds has shredded more than a few accounts over these last few years when traders tried betting on the recovery, and just when the path looks clear to try again the buyers come steaming back in
US 10 year yields
Japan is a big buyer and now that the leash is off pension companies like the GPIF it's helping to keep yields under pressure. In the first 2 months of the year Japanese pension funds bought in the region of $45bn in US stocks and bonds, the highest in nearly 10 years. The last weekly flow data reported that Japan sunk around $7bn into foreign bonds
Three other public pension companies joined the GPIF portfolio model in March, with a combined $250bn in assets. The numbers for the GPIF's Q1 buying haven't been released yet but we can be sure that they were piling in amongst the others. Reuters report that Japan has been particularly active in the long end
It's huge reason why yields are struggling to rise and a huge reason why the dollar is well bid as the yen changes into dollars for the purchases. The increase in Fed rate expectations is opening the purse strings even more to these types of flows
Another rule of thumb correlation is that intraday yield moves can help or hinder the dollar. In the current situation a fall in yields matched by a rise in the buck is probably a clear indication of these flows going through
This isn't news to most experienced traders but for the more inexperienced, this part of the puzzle is a biggie, and something to remember when you're trying to work out the moves.
