Treacherous markets. But they did seem to catch their breath finally. Stocks are due for a big bounce.
By Wolf Richter for WOLF STREET.
The massive movements in the bond market and stock market – in the stock market over some fake news someone had planted – likely broke some traders’ digital necks.
Long-term US Treasury yields have been on a wild ride since March 27. Long-term yields plunged for days, meaning bond prices rose. This occurred as stocks plunged – a classic fear trade. But yields hit bottom Friday morning while stocks continued to plunge in a bad way. And Friday afternoon and Monday, yields snapped back brutally while stocks went haywire.
The 10-year Treasury yield jumped by 22 basis points in regular hours on Monday, the biggest jump since June 13, 2022, to 4.22%, after having shot up by 13 basis points intraday on Friday, from 3.87% at the low point Friday morning to 4.0% at the close on Friday. From Friday morning through Monday afternoon, the 10-year yield has shot up by 35 basis points.
In the evening of April 2, the 10-year yield had plunged from 4.20% to 4.04% when Trump explained in clear language what tariffs actually were: A tax on corporate profit margins that companies can dodge by shifting production to the US, which also caused stocks to plunge.
Plunging bond yields means soaring bond prices. But that entire yield-plunge from 4.20% to 3.87% has now snapped back, and bond prices got beaten back down.
The daily chart going back to the beginning of last year doesn’t show the intraday low point on Friday, and so it doesn’t show the violent intraday bounce-back on Friday, but it does show the action today:
Today’s move was the biggest since Monday June 13, 2022, which occurred after the CPI report on Friday June 10 had blown everyone’s doors off with a month-to-month spike of 1.0% (12.7% annualized) and a year-over-year spike of 8.7%. This was serious inflation. On June 15, 2022, the Fed showed that it finally took this inflation seriously as well by hiking 75 basis points.
And today’s move was the second biggest move since March 2020, when the Treasury market was in total turmoil:
This Thursday, the March CPI will be released. It could dish up another surprise that might give the bond market the willies. Accelerating too-high inflation over the longer term is something the bond market fears. It pulls the bond market into the opposite direction that the incessant recession talk has been pulling the bond market.
These are massive movements in the bond market, with yields first plunging (and prices soaring) for days on the recession-trade and the fear-factor, amid a bitter whiff of panic, and then with yields soaring (and prices plunging) as the whiff-of-panic trades got suddenly unwound in favor of renewed fear-of-inflation trades?
The stock market went crazy today.
Stock markets are also due for a big bounce. And they did bounce today from the intraday lows this morning, including a short-lived ferocious spike this morning on the fake news, spread through the financial media, that Trump would pause the tariffs.
As a result, driven by algos, the S&P 500 spiked by 8.5% from the morning low of 4,835 to the intraday high of 5,246 and then re-collapsed to 4,961 after the fake news was debunked, giving up most of that spike, all in a span of an hour. Just nuts. Trading volume set a record at 29 billion shares.
But it did catch its breath eventually and ended the day down just 0.2%. Dear SEC, are you looking into who planted this fake-news story? Nah, didn’t mean to bother you, I understand you’re too busy loosening up crypto regulations.
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Good, any snap back for 10 year yield to go back to anywhere near historical norm is a good thing IMHO. Last thing I want to see is 10yr to really fall off and mortgage rates goes way down and give any incentive for people to justify buying at still insane price level (especially in SoCal).
Plus would be S**tshow burger if Note/Bonds/Bills yield are all super low again and market is viotaile or on a long term bear ride…in that case it will be another TINA environment again..
Fear and greed.
I suspect some of the countries/people that store money in U.S. Treasuries and our stock market are “getting the hell out of Dodge.” Why would you leave money in a bank that doesn’t like you, that you can’t trust? The money leaves, prices go down.
But, but, but… why were they piling their money INTO Treasuries until Friday morning, if they want to get the hell out of Dodge?
Rumor was China selling $50B treasuries.
As for SEC chasing down the guy(s) who planted the 90 day pause, I wouldn’t be surprised if it come from inside the administration. Love to see their trading records these last few weeks/months leading into this….
I would be checking Nancy & Mitch.
“Rumor was China selling $50B treasuries.”
Another fake-news story, like the “pause.”
Different groups may be doing different things: Domestic folks were selling stock and buying bonds, more impulsively, more panicky; foreigners, individuals, companies, and larger groups, could be slower and more prudent in their moves, lagging behind U.S. in thoughts and actions.
Just a guess; no data to support it. But we both know that a huge amount of foreign money is in U.S markets, and at some point they’re going to get POd if things continue going in the same direction.
Stocks are due for a big bounce?
I agree, sometime in the next three to five years, when the recession is winding down, there may be a mild rally.
Wolf I have RTGDA’s for years. Is this the forward motion you had hoped for? As a finance newbie I am very confused. Wouldn’t a fall in stocks equate to normal prices in things like housing and automobiles?
Stocks are in their own world. They inflated to ridiculous levels, and they were soooooo ripe to be popped.
Don’t get your snowflake panties in a knot. Nothing to see here folks, just a small global market correction for some random unknown reason.
Gabby – mind the milling gored oxen as you journey…
may we all find a better day.
I just wish people had gotten this worked up when NAFTA was being negotiated.
Ross Perot was spot on.
Did that fake news come out from ‘faux noise’ first? Yup, just as I thought…
With plunging equities, and Admin’s push to lower rates, the sudden plunge in bonds is surprising. Foreign sellers? Possibly some over-leveraged entities deleveraging?
Maybe the bond rally was way overdone and based on nothing other than fear, and now it got unwound. Inflation didn’t just suddenly go away last week, on the contrary. So by that logic, bond yields should have risen last week. I mean we can come up with all kinds of reasons why the market did what it did. In the end, markets do what they do because they do it.