Yields Stabilize on more Inflation Signs
Short bonds was a consensus and crowded trade in April after the Fed endorsed higher yields. In theory, a series of strong economic data points on Thursday should have added to the momentum. Retail sales rose 9.8%, initial jobless claims tumbled to 576K compared to 700K expected. Both the Philly and Empire manufacturing surveys were strong with Empire prices paid at a 12-year high.
All of that should have driven yields higher but that's not what happened. Perhaps the bond bears – seeing the failure of a catalyst to cause a move – decided to bail.
US 30-year yield fell 10 bps to 2.25%, touching the 50-day average for the first time this year. There was talk of position squaring, a rethink on inflation and Japanese buying but it's all tough to square.
The rest of the market cheered falling yields. US equities surged to another record and commodities climbed with copper breaking the mid-March high.
The FX market was more skeptical with commodity currencies consolidating. The dollar generally held its ground. On net though, we're starting to see some breakouts in charts we've been watching closely for the past few weeks.
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