Some Bond-Specific Weakness in The Afternoon

Oil and Treasury yields were almost perfectly correlated for almost the entire week. Friday afternoon was an exception. Oil continued sideways to slightly lower while yields rose a bit. Overall damage was negligible, but it was interesting nonetheless. While there was no clear news or event behind the move, we can plainly see that it originated in the shortest end of the curve and/or Fed rate expectations. Friday afternoon illiquidity likely made the move bigger than it otherwise would have been. As for potential reasons, it could be as simple as dealers positioning for next week's inflation reports and Warsh testimony.