U.S. Treasury Yields Retreated from Their Highs, D. Alexander Capital CIO Talks Bonds — TDA Network

A surge in equity prices to fresh record highs as the ISM services index reached its best-ever levels, only to see the middle of the Treasury curve rally, bringing 5-year yields to 93.2 bp intraday. Adding to the atypical (or at least counterintuitive) nature of the move toward lower yields was that it occurred in the wake of Friday’s ~1 million gain in nonfarm payrolls. This all with the backdrop of the Biden administration’s efforts to move forward with the $2 trillion infrastructure plan; albeit with a large portion of the funding coming from proposed higher corporate taxes (a detail stocks appear indifferent toward).

This leaves me with the decided impression that there must be something that I’m missing – neither the first, nor last time to be sure. At the risk of oversimplifying it, I’ve been focused on the risk all of the growth positive factors have 1) come to fruition and 2) been realized more quickly than anticipated; thereby leaving the higher rates outlook vulnerable to the inability of the real economy to steadily surprise on the upside without a meaningful reprieve. Point in fact, this is not what occurred today – instead, the ISM services report not only established a new record, but was also accompanied by the highest prices paid component since 2008. This leaves the impression that something else is clearly afoot, however it isn’t as different from disappointing data as it might ostensibly appear.

— Larry Shover, Chief Investment Officer, D. Alexander Capital