MBS Live Recap: Bonds Bounce Back, But Why?

As far as bond market rallies go, today's was one of the most mysterious in recent memory.  Several conclusions will have to be jumped to in order to assign any semblance of causality.  

One of the best, simplest arguments for latent bond market strength is the fact that the risk barometer du jour--Yen-- had begun a strong move lower (stronger Yen) yesterday.  That trend helped arrest yesterday's rising rates despite relentless stock gains.  Then today, as soon as stocks faltered, rates were instantly ready to pay more attention to the Yen move that had continued unabated.

If you want to add an extra twist to this narrative, consider this article that came out shortly before today's rally began.  Investors would be considering its point (perpetual legal imbroglio for Trump) moments before he was set to give a SOLO press conference (initially billed as "a rally"), all on a day where stocks looked like they might be getting tired after a heroic streak of 5 record highs in a row.  

Like I said, a few conclusions would need to be jumped to, but it would be more difficult to disprove that all of the above factored into the decision to make today a "correction day" for the recent trends in bonds and stocks.  Incidentally the best way to disprove it would be to say that bonds obviously intended to rally today because they essentially lost no ground following an exceptionally strong Philly Fed index at 8:30am.  But there again, we could point to the 2-day move in Yen and say bonds already found their ceiling and were just waiting for the opportunity to move in the other direction.