Till the end of the Iran war, bond traders are keeping oil rates on their screens and comparing oil price motion against bond market movement as the very first task on the everyday checklist. In so doing, we see a bit of outperformance on the part of bonds this morning. While there is solid directional connection (i.e. yields and oil were moving in the very same instructions at the same times), bond yields are lower today while oil is still a bit higher. Surprisingly, today’s highest minute of volume occurred with the 8:15 am ADP data which showed its biggest drop in months. That said, there was not a huge response in yields. The most convenient conclusion for now is that bonds are taking some solace in an absence of huge, new surges in oil rates as well as some helpful cues from the 4.30% bounce seen last Friday.
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