Wow! The bond vigilantes have taken the treasury bull by the horns, and are selling treasuries in force today. Apparently, the treasury market is expecting the Fed to cease easing interest rates soon, but they are driving interest rates higher by selling treasuries. Treasuries reached their high on March 17th, and have been trending lower ever since, forcing interest rates higher despite Fed easing. This 15 minute chart today shows the selling activity, with the commensurate interest rate rise. The US Dollar is also modestly higher overnight.In some ways, this is a good sign, because equity markets have fully priced in a recession, and equities prices have been slowly edging higher as well. Funds are moving out of safe-have treasury investments and back into stocks, albeit on somewhat weak volume. Even bad news for the U.S. economy (investment bank refunding, poor jobs report) over the past week has caused stocks to rally. This is a good example of a case in which the market moves contrary to what would have been expected. It is also an example of the leading nature of stocks and the almost nutty, optimistic nature of equity markets to hope for -- even expect -- improvement soon.
