Strong Nonfarm Payrolls

I want to buy the dip in Treasuries.  But I know that based on the trading since May, a change of sentiment has occurred, where bond investors are now risk averse and will be less willing to bid for Treasuries on down days.  You saw that earlier this week.  It doesn't make me bearish, but you have to be selective now when going in to buy weakness in the bond market.  It isn't like the dips that you saw last year or even earlier this year.

Unlike stock investors, bond investors are much more risk averse.  When downward volatility picks up, the fixed income managers become turtles.  They shell up.  Play defensive.  And they don't get out of that shell right away.  It takes time for the tide to shift.  As early as a week ago, I saw a lot of complacency from bond managers, saying the economic data was weak so Fed would be sidelined.  What I interpreted from the price action over the past month in Treasuries was weakness in the face of economic weakness.  That is not common.

In the stock market, you see a lot of V bottoms, not so in bonds.  That is partly due to the risk seeking behavior of stock investors, who fear missing out on the next rally.  Bond investors fear losing more money.

Bonds are not where people go to for outsized returns, it is for those looking for steady income.  That is why you see fixed income managers get so defensive and sell all at once and don't buy back for a while when returns become negative.  It is due to their natural caution towards higher rates.

The Treasury market is slaven to German Bunds, and has been for over a year.  The German Bund has been the driver for lower yields, and now that has clearly reversed.  Eventually the Fed will become a more important factor, but now most of the focus is squarely on the Bunds and how much weaker it will get.  I do see it getting weaker, but not beyond 1.10%.  So it should be safe to buy dips going forward, but you have to be selective.

I have no opinion on the S&P, it looks stuck in a tight range and is neutral to me.  Too neutral for me to trade.