Bonds Have a Lot On Their Minds (And The Mega Reversal After The Tariff Pause)

There are actually too many relevant considerations for bond market movement to attempt to put them all in one headline. Everyone can agree that today's main event was the announcement of a 90 day pause on tariffs and the ensuing mega reversal across multiple corners of the financial market. The stock reversal was the most insane, but MBS put up some numbers as well, with nearly a 1 point round trip from weaker to back to unchanged. Much like yesterday, the best way to bring yourself up to speed on the current esoteric underpinnings is to take 10 minutes with today's recap video. 

For those who cannot or will not, here's the quickest and dirtiest list we can offer:

 Things that have caused bonds to lose ground even as stocks have also lost ground:

• Unwinding/deleveraging of the Treasury carry trade, which involves highly leveraged repo market borrowing to fund trades that capitalize on microscopic differences between cash and futures in Treasuries
• Liquidations to raise cash for a variety of reasons (uncertainty, opportunities in other parts of the market, tax season payments, etc)
• Expectations/fears regarding foreign central bank Treasury demand (NOTHING to do with China/Japan weaponizing Treasury holdings to teach us a lesson, and everything to do with the fact that foreign countries won't need to buy as many Treasuries if we have weaker trade relationships).
• Doubts regarding the balance of spending and revenue in an environment where revenue increasingly relies on tariffs/trade
• Doubts about how well this week's Treasury auction cycle could be facilitated
• Technical correction to last week's sharp rally
• Inflation considerations surrounding tariffs 

Since tariffs are a big part of many of those bullet points, it makes sense to see relief in bonds after the 90 day delay, and it also makes sense that Treasuries still have some things to worry about (hence not being back to unchanged levels).