Seeing as we haven’t had a rally in bonds like the one this week for quite some time, this session made for a very welcome change. It’s also a great example of why predicting the market is generally a bad idea unless you’re literally a clairvoyant. Based on economic data and remarks from the Fed, the general consensus for the last couple of weeks has been that we’re firmly in rising rates territory, so there were a lot of surprised traders out there today with rates falling.

As to the root cause of the rally, it comes down to German Bunds, which enjoyed a robust session that resulted in yields falling to .89%, a number that carries particular significance given that they broke 1% yesterday. Treasuries and Mortgage Backed Securities followed suit and were helped along by a weak Consumer Comfort Index reading evincing a decline for the ninth consecutive week. However, it is worth noting that Retail Sales data was strong, and while Jobless Claims were slightly higher than projections, they were still well under 300k. All that’s to say that it’s highly unlikely that this rally will continue, so it would be very unexpected if we saw another fall in rates tomorrow.

By John Ebner, Managing Director, Opes Advisors

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