It took a while, but the September bond finally cleared out some technical deadwood at the intersection of its 100- and 200-day moving averages just below 102 on Monday in very light trade. The catalysts were not really new, but the recurring themes of equity weakness, emerging market angst and eroding commodity prices set off a brief round of curve flattening.
The September bond stalled just shy of 102-15 June 28 highs, but the charts have been opened to 102-25/28 late June highs. The 2s/30s spread narrowed to +152 basis points before widening back out to +155 basis points. Some early European broker buying of September bonds and 5s set the tone, with bullish writing of bond puts also a positive factor. The CRB fell to 205 before recovering, with weakness in energy and grain groups weighing on the commodity index.
Corporatations remain profitability-challenged, and stocks look likely to lag until the Q2 earnings season climaxes this week. A pair of Fed members (Moskow & McTeer) spoke over the weekend, but offered opposing views on whether the economy would recover later this year. May inventory data suggested the correction is well under way.