US yields plunged on Thursday as a morning bond rally catalyzed by weak manufacturing activity gathered considerable momentum in the afternoon after Donald Trump restarted the trade war with China.
10 year yields dove 13bps to 1.89%, a new “lowest since November 2016” moment, while 30 year yields fell 10bps to 2.43%, the lowest since October of 2016.
“The initial two-minute period following Trump’s tweets saw a 107.6k TYU9 trade” Bloomberg notes, recapping a surge in futures volume. “Overall between 1:25pm and 1:35pm, a total of 334.4k TYU9 contracts traded taking total volumes on the session to over 2 million contracts”.
But it was the action prior to the president’s tweets that had some observers putting on their “tinfoil hats”
“It sure looks like someone in the bond market knew this was coming”, Bloomberg’s Cameron Crise mused, at 1:41 PM. “Who? How? I am goin’ long tinfoil hats”, he remarked.
A half hour earlier, Crise penned a short little post documenting the day’s action. “Yields on two-year Treasuries are back to their pre-Fed levels, and further out the curve the rally has taken yields to their lows of the week and beyond”, he wrote at 1:10, adding that “this is kind of crazy price action given the messaging from Powell yesterday, and you have to wonder what’s driving it”.
The implication, in case it isn’t clear enough, is that somebody anticipated Trump was about to blow a gasket on the way to declaring the ceasefire with China null and void. (Peter Navarro, STIR trader).
Whatever the case, bad trade news was interpreted as being just plain old bad by equities on Thursday. Trump might have waited a few days to get clear of Powell’s “mid-cycle adjustment” talk before attempting to roll out the “crazy like a fox” strategy again.
Stocks’ wild ride led to a similarly “impressive” (if that’s the right word) range on the VIX. Thursday was only the second session this year when the VIX was down two points and up two points on the same day (h/t LK).
As far as bonds go, Thursday was the best day for TLT since May of 2018.
Just as the closing bell sounded on Wall Street, Trump told reporters he’s “not concerned” about the market reaction to the tariffs.
It’s a good thing.
Rick Wilson is right: Everything Trump touches turns to sh*t.