Same Waiting, Slightly Less Comfort

After the last CPI report sent rates back down to the prevailing summertime range, we figured we'd be waiting until tomorrow's Fed day for the next big shoe to drop.  While that's generally been the case, rates haven't managed to stay perfectly inside the range.  The closer we get to the day itself, the more upward pressure we're seeing on yields. Overnight trading offered some clues about the pre-Fed weakness.  The typical correlation between US and EU bonds broke down in a fairly noticeable way with Treasuries weakening while EU bonds rallied.  Granted, neither move has been extreme, but the divergence is notable as it provides clues to Treasury-specific anxiety ahead of the Fed.  "Anxiety" in this context could be as simple as traders exiting long positions taken in the wake of the supportive bounce 2 weeks ago, or even the mini supportive bounce last week.  There's also always a possibility that Treasury auctions add some undue pressure when they coincide with Fed week.
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