Yesterday saw heavy selling across the treasury curve with the long end being hit especially hard (the steepening many people didn’t think would happen with liftoff). Chatter of Chinese and Saudi Arabian sovereign funds hitting the cash market were blowing around the street.

China could simply be diversifying its reserve holdings away from the USD as it looks to become a reserve currency itself. I also couldn’t blame them for taking some profits on their roughly $1Tr in treasuries.

Saudi Arabia would be selling bonds to make up for lost liquidity from the drop in oil revenues.

Yesterday got kicked off with a very solid durable orders print that also had strong prior revisions. This knocked bonds down and lifted equities sparking what turned out to be a massive rally in the stock market.Durables along with July business inventories and retail sales data all came in ahead of expectations with upward revisions. These revisions should lead to an upward revised GDP print this morning. Consensus is for 2.7% to 3.6%, but I wouldn’t be surprised to see a 4% print.

Any GDP print north of 3% along with another low weekly unemployment claims number should get bonds moving south again and stocks moving up. We’re starting to get into the good news is good news phase with both equities and rates moving higher simultaneously.

Thought of the day: Don’t get fooled into believing any market is smarter than another..Markets are all driven by people / algo’s seeking to maximize profits.

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