It was another wild day in the treasury market today. After an overnight decline that took the price of the US Long Bond Future’s contract down by just under 10% from its intraday highs earlier this year, the treasury market sell-off completely reversed itself once traders got settled into their turrets this morning. At the depths of this morning’s sell-off, the yield on the 30-year US Treasury was up 9 bps versus Monday’s close to a level of 3.13%, but by the end of the trading day the yield was back down to 3.02%. The 10-year treasury saw nearly the same move with its yield rising to 2.36% before finishing down on the day at 2.25%. So how does today’s positive reversal stack up to recent history?
The chart below shows the price of the US Long Bond Future since the start of the current equity bull market in March 2009. Each red dot on the chart indicates days where the price of the contract was down as much as 1% intra-day, but finished up on the day, which is what happened today. The last time we saw a similar type move was nearly two years ago in July 2013, and since March 2009 we have only seen nine occurrences including today. While the prior occurrences of positive reversals in the US Long Bond Future were not a clear buy or sell signal, one thing you can count on is that the recent period of extraordinarily low volatility in the treasury market is over.