Big Bad Day For Bonds. What’s Next?

Big Bad Day For Bonds. What's Next? Bonds sold off early and aggressively on Monday in a move that most onlookers are quickly attributing to geopolitics. Specifically, the thought is that higher oil prices imply higher inflation and, thus, higher rates. While some traders probably woke up and decided to sell bonds based on this logic, they didn't account for the pace of the sell-off. Rather, it was a perfect storm of timing and technicals with Friday's month-end positioning leaving bonds overbought and well through the 4% technical floor. Today ran the risk of being a selling day anyway, but the obvious goal of re-entering the 4%+ range made it that much more swift. Closing out at 4.04% doesn't seem too bad in the bigger picture. It's a hard reset in the short term, but not necessarily a sign of additional momentum. For that, this week's econ data would need to gang up and send a bullish message for the economy. Econ Data / Events ISM Manufacturing Employment (Feb) 48.8 vs -- f'cast, 48.1 prev ISM Manufacturing PMI (Feb) 52.4 vs 51.8 f'cast, 52.6 prev ISM Mfg Prices Paid (Feb) 70.5 vs 59.5 f'cast, 59.0 prev Market Movement Recap 09:08 AM Mostly flat overnight with sharper selling starting at 7am. 10yr up 5.9bps at 4.009 and MBS down just over a quarter point. 10:04 AM a bit more weakness after ISM data. MBS down 10 ticks (.31) and 10yr up 8.8bps at 4.036 11:40 AM New lows with MBS down 3/8ths and 10yr up 10.3bps at 4.051 03:30 PM MBS still down 3/8ths and 10yr up 9.9bps at 4.046