Trouble in the Bond Market

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, May 22.

State of Play

Stocks were on their way to a day of gains yesterday until a Treasury bond auction went awry. At issue was demand for 20-year Treasurys, which was hurt by all this tax bill stuff. This sent yields everywhere skyward (yields move inversely to prices, so this whole thing was very bad for bonds). The ensuing risk-off tanked stocks, as all but 14 of the S&P 500 closed lower.

As we eye or board of indicators for signs of direction at 0630 ET, a mixed bag awaits:

• Cryptos are rallying. Bitcoin is up 4% to trade close to $111,000, close to a new all-time high set yesterday;

• Bonds are recovering a tiny bit. Or at least they’ve stopped their bleeding for now. The 10-year yield is down 2 basis points to 4.58%. That’s off of the high of 4.60% recorded yesterday, but still quite close for comfort;

• Commodities are dropping. WTI crude oil is down 1.5% to trade around $60.50/barrel. Copper is down 1%;

• Stock index futures are stuck in the middle doing absolutely nothing. No major US index is moving more than 0.2% from the break-even point so this can be considered a wash.

Cover art by author via Grok AI