Oil Supply News is Just Noise; Actual Market Movers on The Way

The bond market is still in the process of reestablishing composure after the recent banking panic.  The bank episode sent Fed rate expectations plummeting at first, then into an extremely volatile sideways range for 2 weeks. As of last week, panic was nowhere to be seen on charts, but caution remained in terms of outright levels. In other words, the blue line in the chart below is still much lower than it was in early March (and lower than the current Fed Funds Rate!), but no longer showing the same level of volatility.  Caution, not panic.

That caution is one of several reasons the overnight spike in oil prices has had limited impact on rates--especially longer-term rates like 10yr yields.  Due to their short-term inflation implications, oil prices have a logically larger impact on shorter-term rates and Fed Funds expectations.  Longer-term rates can consider the hit to the economy (either due to higher oil itself or central banks' efforts to push back on the inflation implications).  The past few sentences are much ado about nothing considering the relative size of the move though.  Oil has merely done what the stock market had done more than a week ago and returned to early March levels.  Meanwhile, bonds are taking more cues from the aforementioned "caution."

We'll get more legitimate market movers this week in the form of big ticket economic data.  Friday's jobs report is the obvious headliner, but ISM PMIs (today and Wednesday) are no slouches.  Of the two, it's Wednesday's NON-Manufacturing index that carries more weight these days.