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Treasury Buying Panic Reaches Major Inflection Point, Whither Yields Go, So Too Stocks

The Treasury had a heavy calendar last week. The market will face a big Treasury settlement this Thursday as a result. The need to pay for that supply will play a role in the market probably on Tuesday, Wednesday, and possibly Thursday, or with a delayed reaction on Friday. However, balancing that is the ongoing Treasury buying panic, mostly driven by the flight of European capital into the US. The 1.70 level on the 10 year is the key benchmark to watch in determining whether that capital flow will be sufficient to send Treasury yields crashing further. The recent linkage would suggest that if yields do break down, stocks will go with them, with 1295 being the benchmark to watch on the S&P.

On the other hand, with no new long term supply offered next week, once the May 31 settlement is put to bed, the pressure on the market will ease until mid month at least. This report looks at the data likely to play a role in how these markets move in the weeks ahead.

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