Bonds Continue To Confuse Traders

Friends

Traders of stocks seemed today to be paralyzed/mesmerized by what continues to happen in the bond market. Despite the improvement that we have seen, though very deliberate in nature, in economic data points, bond yields continue to decline. Folks, bond yields are “suppose” to rise when inflation picks up and economic activity improves. Instead we have seen the yield on the 10 year Treasury note fall from 3% to 2.44% so far this year. As we have been pointing out, different stories are being told by different markets.

As for today, the Dow Jones Industrial Average was down 42 points to close at 16,633. The S&P 500 was down 2 points to finish the day at 1909. Gold was down $7 to trade at $1258 per ounce, while oil was down $1.25 to trade at $102.86 per barrel WTI.

The rally in bonds (drop in yields) could be attributed to massive bets that rates would rise made by large institutional players at the beginning of the year, and that now they have been forced to buy to cover their losses. Whatever the reason (if, indeed, there is a reason), the different directions that markets are trending have market participants very confused at the moment.  So far, the “sell in May and go away” theme has not really worked for stocks or bonds. Let’s see how the week and the month end up.

Have a nice evening everyone.

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