You know times are tough in the world of bond market analysis when I resort to using an uninspired bullet point list of events for a headline. The only way it could get any worse would be something like “One Weird Trick To Dealing With Sideways Rates” or “Trader Reunited With Bond Market After 20 Years; You’ll Never Believe What Happened Next” (both sponsored by Taboola or some such thing). But I digress…
So yeah, bonds are sideways. That much we know. Are they sideways due to coronavirus-related uncertainty? After all, ‘winter is coming’ (kids going back to in-person school in many cases, traditional infectious disease season, more activity moved indoors, etc.). Or are traders waiting to see the election outcome and how other traders play the election outcome?
The answer is “yes” either way. Every time we look for a narrative that makes a case for a move in a certain direction, there’s an equally obvious counterpoint pushing things back to the middle. To repeat my standard refrain, all that can be done from a bond-watching, rate-following standpoint is to wait for a breakout from “the range.” That range can be defined in narrower terms for those seeking short-term cues (i.e. .63-.73% in 10yr yields). Or it can be defined as the true post-covid range of .50-.95 (yes, there were intraday levels outside that range, but I don’t really count anything that happened in March because that wasn’t really “trading” as much as it was utter and complete “panicking”).
Now, about that laundry list of events.
Econ data. There are a few events on the calendar, but none of them are big tickets. If one of them has a tendency to move markets in any noticeable way, it’s the 9:45am Markit PMIs. Just keep in mind that stocks have moved bonds much more than data recently and due to its proximity to the 9:30am NYSE open, 9:45am can be prime time for that correlation.
Treasury Auction. Today brings the 5yr auction, which is probably the second most important tenor behind 10yr notes. Auction amounts are at record highs, so it’s always useful to see how well the market is able/willing to cope. We’re not expecting any major drama here, but if drama shows up, it would have an impact.
Fed Speakers. There are more than a few on the calendar today. I’m not sure what they could offer by way of new information given that the announcement was just last week (the one that was thorough in its equivocation). So here too, the baseline is for an absence of drama despite the impressive list of speakers (Daly, Kashkari, Bostic, Rosengren, Evans, Quarles, Mester, Clarida, and of course, Powell with his 2nd of 3 days testifying on the coronavirus response).
Sideways Range. We’ll take that one as read.