Europe Driving Gains While US Bonds Resist

Abstract

European bond market's reaction to the European Central Bank (ECB) announcement is the big story. Traders see the pre-commitment for March's hike as evidence that the dovish shift has begun. The result is a massive rally in EU bonds--far too big for US bonds to try to match. In fact, 10yr yields are rallying at a mere quarter of the EU 10yr pace. U.S. 10yr prices are rallying. The gains mean the prevailing range has been broken yet again. This happened a few weeks ago as well, but it didn’t stick yet again, and it didn't stick. This time it makes sense to consider subsequent technical targets.