Eoin Treacy's view -
Market detectives looking to explain the fury of Thursday’s Treasuries selloff will find most of the evidence pointing to technical rather than fundamental reasons.
A combination of supply indigestion, a potential $50 billion position unwind and vanishing liquidity exacerbated moves as traders aggressively repriced the Federal Reserve rate-hike outlook, despite no major economic developments or shifts in tone from policy makers.
“It wasn’t an orderly selloff and certainly didn’t appear to be driven by any obvious fundamental continuation or extension of the reflation thesis,” wrote NatWest Markets strategist Blake Gwinn in a note to clients. A number of more “technical-style” factors were in the mix, against a backdrop of a good-old-fashioned buyers strike, he said.
In a bull market buying the dips always works. When buying the dips stops working, the bull market is over. That might seem tautological but it is the strategy every investor ends up following because buying the dips is the best risk-adjusted way of buying in an uptrend. That question will be discussed in every emergency meeting at fixed income fund management houses today and over the weekend.
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