09 Jul Finger is on the lock trigger
Markets are starting the week with quarterly earnings season as the focus, at least for stocks. The bond market has continued to be in a state of turmoil since the beginning of May, and last week was no exception. Interest rates had their 2nd roughest week in decades, with an overblown sell off occurring on Friday. Yesterday and today’s rebound is an indication of this, but the dominant trend clearly has rates moving higher. The move higher in rates was fueled by talk of QE tapering, and it appears that investors are not willing to hold much in their bond portfolio when the Fed stops buying. That said, the Fed must be wary of stifling the housing recovery with rates moving up too fast. Bonds are currently trading at a 2 year old price level, so there is probability of rates possibly holding here. But, that can change if bonds break lower, so a cautious float stance with a finger on the lock trigger is the only safe approach today. There are auctions this week, with results due out at 1 pm ET starting today. This could bring on volatility depending on how it is received.