The Upcoming Week Will Be Significantly More Volatile

by Matthew Graham

In general, you should be skeptical any time someone says a future week will be more volatile. There's really no way to know such things in advance, but this time is an exception. While we can't have any idea which  direction rates will move next week, we can be sure that we'll see more volatility.  Part of the reason is that the outgoing week would have been hard pressed to be any less volatile.  For rates, it was largely an aimless drift apart from two offsetting reactions to calendar events on Thursday and Friday (highlighted below). Thursday's sharper drop in bond yields followed a higher reading in the weekly Jobless Claims data.  This was one of the only economic reports that came out this week.  It showed an abnormally large change that resulted in the highest reading since August 2023.  While this could prove to be an outlier, it got the market's attention in the morning. Thursday afternoon saw relatively strong at the scheduled auction of 30yr Treasury bonds.  In general, strong auctions put downward pressure on yields/rates, all other things being equal.  The present example was worth roughly the same amount of improvement as the Jobless Claims data. While the bond market was already pushing back in the other direction on Friday morning, the Consumer Sentiment data kept things moving in the same unfriendly direction.  This was not the usual case of stronger economic data pushing rates higher.  In fact, headline consumer sentiment was much lower than expected.

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