MBS RECAP: Another Push to Worst Levels of 2015 for Bonds

Another day, another chance for bond markets to continue their selling spree.  It began in a bad way, no matter when you woke up.  Asian markets only traded Treasuries modestly higher in yield, but weakness kicked into high gear when European trading began.  European yields jumped to their highest levels since September well before anything happened to cause the move. 

In other words, traders were trading based on positions (i.e. "if a certain level is reached in a certain security, then I will sell/buy these certain securities") and compulsory tradeflows.  The latter can refer to any number of root causes, but good examples include money managers that have to make certain trades based on changes that clients have made in their portfolios or bond dealers that must sell Treasuries in order to lock rates for corporate bonds they're handling (corporations enlist several "bookrunners" to facilitate bond issuance).

Whatever the case, the point is that trading motivations had nothing to do with fundamentals.  It's not as if bond markets are digesting new data about economic growth and inflation, and acting accordingly.  This is an ongoing cleansing process that's happening in response to whatever you want to call the process that took many of Europe's sovereign yields into negative territory by mid April.  Like yesterday and the day before, it's too soon to say if this will continue in the same vein as 2013 or 2010 (which would make it just about half-way over).  The fact that it COULD is all that matters.