Treasury Bonds fell sharply following stronger-than-expected jobs data Friday. The dip comes after several months of gains. The table is now set for volatility this week as Federal Reserve Chairman Jerome Powell delivers commentary to Congress Wednesday and Thursday. Inflation data is also worth watching.
The first half of 2019 is in the history books and, after solid gains in the first quarter, stocks and bonds added to the bullish trend in Q2. Crude Oil was little changed and Gold was a bright spot as the commodities market saw mixed action over the past three months. Lastly, many interesting stories were told in the currency markets, including a 220% surge in Bitcoin.
Stocks and bonds have been rallying, while yields fall and the Dollar slips, as weak economic data fuels expectations that the Federal Reserve will aggressively cut rates later in the year. That theory will be tested when the Federal Reserve Open Market Committee (FOMC) meets later this week.
Treasury bonds surged during the month of May while the 10-year rallied to its best levels since September 2017. Concerns about the global economic outlook are driving the gains, and those worries are also fueling some speculation that the Federal Reserve will cut rates later in the year. That theory will likely be tested when key jobs numbers and inflation data are released in early June.
Friday’s payroll data could shake up a Treasury market that has already been reeling lately. Expectations are for another strong report, but nowhere near the 304,000 jobs added in January. Treasury prices are trending lower ahead of the report — a sign, perhaps, that some expect another upside surprise in the headline number.
It's easy to get wrapped up in headline-grabbing financial commentary. For those of us who live and breathe trading, it's hard not to have a strong opinion on long-term market trends. Nowadays, you can't go far without hearing that Bitcoin, equities and Treasuries are in a bubble.
Instead of getting wrapped up in the hype, Billionaire Hedge Fund Manager Cliff Asness argues that the mainstream understanding of bubbles is wrong. He thinks too frequently "bubble" is synonymous with "expensive": "The term bubble should indicate a price that no reasonable future outcome can justify."
Is Bitcoin a bubble? Are there future scenarios that could justify the current price? Imaging that might require a bit more of a discussion and understanding of cryptocurrencies.