Range Breakout, Capitulation, Something Had to Give

There's something rotten in the state of the bond market.  After the early July CPI-driven rally seemed to put a ceiling on the range, there have been several somewhat enigmatic episodes of selling without the sort of obvious motivations that normally line up with big moves.  In other words, it wasn't like a big piece of econ data came out this week to crush the bond market.

Nonetheless, bonds are getting crushed.  Analysts are forced to speculate about broad considerations that are hard to measure in the short term.  These include things like the supply/demand considerations surrounding the Treasury refunding announcement, ratings downgrades, and a delayed reaction to Japan's yield curve control tweaks. 

The other broad consideration is that the market had the opportunity to embark on another hopium binge after CPI but instead chose to believe that the Fed really won't be cutting rates for a long long time.  At the very least, traders waited for Powell to indicate whether CPI made a difference, but the answer was unsurprisingly:

POWELL: JUNE CPI WELCOME BUT ONLY ONE REPORT, ONE MONTH'S DATA
POWELL: WILL BE LOOKING TO SEE IF SIGNAL FROM JUNE CPI IS REPLICATED

Markets didn't have a chance to do too much with the press conference before being forced to digest the stronger jobless claims and GDP data the following morning.  Then it was month-end. 

Bonds have undergone several "repricings" over the past few years as traders have come to terms with a shift in the prevailing beliefs about how things can play out.  The last two weeks are arguably one such instance.  Tomorrow's jobs report could decide whether the repricing event if full blown or just a close call.