As the summer months got under way, it seemed as though the fixed income markets would enjoy a peaceful respite from the tumultuous first half of 2018. Alas, it was not to be. The bond market found itself buffeted by economic data as well as global/political events.
By mid-July, the 10-year U.S. Treasury note yield was beginning a pronounced move from near 2.80% to back above 3.00%, a level last seen in May. Market commentators attributed the move largely to a growing consensus that the quarterly U.S. GDP number would easily exceed 4%, and to speculation that the Bank of Japan would reverse policy on its yield control program. But come August, the market again changed course and bond yields, particularly long bond yields, began a steady march lower. Despite solid economic growth data, including positive employment reports, good retail sales numbers, strong corporate profits, and an equity market rally, the 10-year yield fell, finally bottoming out at a 2.81% on August 24.