Why did Treasury bonds selloff on Wednesday? Obviously, we can’t ever know for sure why markets move the way they do especially in the shortest timeframes. Still, that won’t stop us from speculating anyway.

The 10-year UST yield spiked just above 3% in early trading Wednesday morning. This particular drive began the night before. Treasury futures had been flat for all of Tuesday until 9:30 pm ET. That’s about the time Chinese currency markets open in Shanghai.

With China open and everywhere else closed, someone began heavily selling UST futures so that by the time Europe opened yields were uniformly rising. The final bigger leap came in the final 30 minutes before US markets started up. By 9:30 am, the 10s were at 3.011%.

Trump reflation? Technical selling?

It’s curious, anyway, that today the PBOC steps into the CNY market to try to stop its further decline (so much, again, for “stimulus”). But in order to fix CNY (and CNH, which had already touched 6.90) higher against the market’s entrenched direction, actually for the second straight day, China’s central bank (or banks operating on its behalf) better have some spare “dollars” at the ready in order to sell (supply) them to achieve a turnaround while maintaining the currency band.

It wasn’t just the 10s, either, as there was a selling blip in the 4-week bill late Tuesday afternoon. Who holds the biggest stockpile of UST bills on the planet?

Since that high on Wednesday morning yields are lower again, falling in more determined fashion today. Bills and bonds. It looks more and more like the spike in yields/bond selling was a one-off.

I wrote Monday:

Seeing the repetition [currencies stopped falling around the same time], however, in so many places (especially something like DXY which doesn’t have any allocation to Asian currencies; I don’t include JPY in that category) makes me believe that something specific is behind it all. I’d like to know what it is because in all likelihood that would determine if, or when, things might change back; the window closes again.

 

For now, though, it’s undetermined with but circumstantial suspicions falling on the usual suspect.