Bond Market's Positive Vibes Suddenly Disappear

As recently as the start of last week it looked like the U.S. Treasury market was primed for an historic bullish breakout, with pundits forecasting a quick march lower in 10-year note yields to the 2 percent yield marker as inflation measures sagged, oil prices entered a bear market, and disarray in Washington trashed all hopes for the Trump administration’s economic agenda.

Although that bullish landscape hasn’t changed much, the market has surprisingly traced out a significant 28-basis-point reversal in yields to the 2.36 percent area and the bears are firmly in charge. Even as measures of volatility continue to plumb new lows, bearish sentiment is rapidly pervading the fixed-income market, with threats evident from hawkish central bankers, improved economic data and ominous trading patterns.