Bond Market's Melt-Up Has All the Hallmarks of Fear

Earlier this week I wrote in a column that the relentless rally in U.S. Treasuries had been very orderly and logical, as Hurricane Harvey and North Korean provocations combined with disarray in Washington to force any remaining bond bears to concede defeat. Since then, something has changed: A whiff of panic has crept into trading activity in what can only be described as a "melt-up" in bond prices.

While the mix of news in terms of politics and economics hasn't changed much, unexpectedly dovish comments from European Central Bank President Mario Draghi early Thursday contributed to a visible change in trading patterns. Offers to sell bonds have grown sparse, liquidity has deteriorated, and the tone can best be described as near-panicked and "grabby."