Following yesterday's move in Treasuries was a bit of a doozy. 10-year yields surged up to a high of 2.849%, up by nearly 10 bps, before falling back to hold lower on the day by around 4 bps to 2.706%. It was evident that bond bears were not throwing in the towel after Tuesday's action but the return of bids late on perhaps says that they are respecting key technical levels:
The broken neckline (white line) and 100-day moving average (red line) are still key levels that are holding on the daily chart.
But what exactly is driving trading sentiment this week in the bond market? US-China tensions (and the relief after) were arguably part of the factor and was a good excuse for some volatile moves on Tuesday but the Fed outlook continues to be a key factor as well. On the latter, Fedspeak yesterday mainly reaffirmed that the central bank is still on a relatively aggressive tightening path and that rates will stay high for some time.
That was enough to drive yields higher before a late drop (stocks continue to show no signs of wavering though). That is telling that the bond market appears to be rather unsettled for now as there are strong elements of pushing and pulling.
Perhaps it is the technical consideration that is driving price action but either way, it looks like we may have to look towards the US jobs report tomorrow to obtain more clarity about market sentiment for what might come next.
