Rally Suggests Market Got Ahead Of Itself On Recovery

We've received many client questions about today's strong Treasury rally. There is no straightforward explanation but likely multiple factors:

• As we wrote earlier, nothing in today's data to trigger a big bull flattening move as retail sales / jobless claims and regional activity indices were much stronger than expected (though arguably IP / manufacturing disappointed slightly).
• But it looks increasingly like strong data for this part of the cycle was already priced in so it's a bit of "sell the rumor, buy the fact". If the market has indeed got ahead of the recovery, the narrative could change quickly to "the pace of the recovery has peaked".
• Some desks citing corporate issuance hedging (JPM and Goldman announcing $ bond issues) and foreign buying (i.e. Japan) helping fuel the move as well.
• Either way there is definitely demand for long-end Tsys at these yields, with the strong 30-Yr Tsy auction earlier in the week.
• Some technicals coming into play as well, with TYs pushing through two key levels of resistance this morning - last through 132-09+ as we wrote earlier (session high now 132-16+).