US Treasuries don’t seem to be backing down on the timeline for reducing QE. Sovereign yields are flying today on the (p)resumptive taper trade following solid GDP and Employment data.
Following Thursday’s better-than-expected Advance GDP print (2.8% v. 2.0% expected, 2.5% last) and today’s +204k NFP release, the US Treasury curve is steepening with longer-dated issues sliding heaviest.
Are US Treasuries selling off in renewed anticipation of the Fed tapering asset purchases (QE)?
Whatever the case, the 10-Year yield (TNX, above) has quickly ramped half-way back to its Summer high at 3% after moving as low as 2.47% following the “surprise” FOMC decision on September 18 to delay tapering.
US Treasuries: 10-Year Treasury Note Yield (TNX) – Weekly: Taper Off, Taper On
Is this whipsaw just so much aimless trading slosh as sovereign yields get jerked around by the bond market’s perception of an ambivalent, not-quite-so-credible Federal Reserve?
There’s some of that going on, surely; but TNX‘s decline bottomed right at the long-term falling trend line of the falling rate wedge (diagonal white lines, above) that has prevailed since QE began in 2008.  Something similar happened after Ben Bernanke’s “next several meetings” testimony in early May, but that move failed as the Fed walked back taper expectations.
This time, however, the yield breakout held its test at this trend line is bouncing aggressively.  Unless 2.47% is broken and bond bulls get some real traction then (remember, bonds move inversely to yields), this TNX breakout is real; and yields appear to be headed measurably higher.
Twitter: @andrewunknown and @seeitmarket
Author holds no exposure to securities mentioned at the time of publication.
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
