Bonds continue trading in positive territory this morning, and weaker-than-expected Existing Home Sales data (5.33m vs 5.45m forecast) offers no immediate threat. But threats may be offered nonetheless.
The two key considerations for bonds at the moment are NYSE-related tradeflows and European bond markets.
NYSE-related tradeflows refer to the flood of trades that we've increasingly seen hitting bonds at 9:30am. Some of this is a simple factor of increased liquidity across all markets as a major exchange comes online for the day, but most of it has to do with NYSE-traded funds with bond market components.
In other words, if a bond ETF had overnight orders waiting to be filled, we would see a sudden surge in the direction implied by those orders at 9:30am. These trades were beneficial for bonds at first, but ran out of momentum just before the 10am data.
At the same time, European bond markets were putting in their low yields of the day. In general, European yields have been pulling US yields lower in the second half of the month, and the latter seem reluctant to make their own new lows without the guidance. At this point, I'm looking for German Bunds to break back below their lows (seen just after 9:30am) before getting my hopes up that Treasury yields can do the same.
(On a hopeful note, in the time it's taken to type this, German Bunds are already moving back toward those lows, and Treasuries are having second thoughts about bouncing higher for the day.
