Economist's Insights

Today’s Trading Activity – Treasurys Rally, Rally, Rally!

Apr 18, 2017

A smattering of weaker U.S. economic data, a dash of uncertainty about a fiscal reform timeline, a bit of geopolitical tensions (e.g. North Korea, Syria, Russia, weekend French elections, Brexit), and a pinch of stretched technical indicators create a fine recipe for a big move in Treasury yields. Monday’s breather from last week’s Treasury rally proved brief as bond bulls took hold of Tuesday’s session and sent yields tumbling. The 2-year yield fell 4.1 bps to 1.160% (low since February 24), just above key resistance around 1.14%. The 5-year yield dropped 7.6 bps to 1.700% (low since November 16) and closed below the key 1.80% level for a fifth consecutive day. The 10-year yield plunged 8.2 bps to 2.168% (low since November 11), through 2.20% which was the last mile marker in front of a technical no man’s land. All told, the moves reduced the premium for holding 10s over 2s to its lowest level since election day. After notching their strongest performance in six weeks on Monday, the Dow slumped 0.6% and the S&P dropped 0.3% following big losses in Europe. The Stoxx Europe 600 saw its worst day since November 2 and Britain’s FTSE 100 fell the most since the Brexit vote last summer. The Dow fared the worst among the major U.S. indices thanks to a near-5% drop in Goldman Sachs following an earnings miss. The Dollar was pummeled by strength in the Euro and British pound and is headed towards its post-election lows.