It was coming really, the path of least resistance was up, and any pull back in stocks wasn't really convincing. We jumped over 200 points yesterday as stock market aroudn the world all pushed up to yearly highs. At the begining of yesterdays session we had everything going up including the bond market, but as the rally in stocks gained steam they all reversed course and bund finished down below 119 again. This morning we have had a continuation in the selling in government bonds as risk appetite increases.
Euribor spreads remain at the high along the curve. However there aren't many players in the market right now as volumes remain low, and with ECB rates on thursday, traders are waiting for the next move from Trichet.
Talking about this rally, some say we are looneyville. Firstly when we rally from the announcement of a bankruptcy in one of the US biggest organisations, we know we have a disconnect from reality. Secondly when GM rallies, a stock that has declared bankruptcy, and which has filed a plan that will result in the effective total destruction of its common stock, well enough said!
Bottom line is you cant fight the tape, more buyers then sellers, so the only way is up until that situation changes.
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