- No econ data on tap apart from Consumer Sentiment
- Oil surging, how much does it matter?
- Bonds trying to confirm technical bounce, but not quite there yet
After a rollicking week of data, events, and market movement, bond markets hit a bit of an information void today, and will be forced to find their own path. In so doing, they'll have to rely on related markets and
What the hell does that nonsense even mean? Let's break it down:
Related markets. This simply refers to the usual interdependent relationships that bonds have with things like oil and stocks. In examining those relationships, it's good to keep in mind that they are far from perfect. Sometimes they are connected in the short-to-medium term. Other times, it takes an extreme amount of movement in one market to get the attention of the other.
Tradeflow Landmines. This refers to the trading positions held by various bond market participants. For instance, let's say a speculative trader bought 10yr notes when the yield held below 1.92% yesterday. They are "long." Let's say 1.92% is where they will "cover" their position if bonds lose ground. In other words, if yields rise to 1.92% (or some level close to that, based on their individual strategy and/or algorithms), they will sell 10yr notes in order to close/cover their position. When they sell, it will raise yields further, potentially triggering the next trader's stop-loss level, much like stepping on a landmine.
Technical paths. This ties in with the
The yellow lines are Bollinger Bands, where the central band is the 21-day exponential moving average. I'm not a huge fan of moving averages as predictive in and of themselves. They're more useful when they're being broken in conjunction with other technical signals. In the current case, if 10yr yields could also make it down below 1.85-ish, it would add validity to the break of the