Well, bonds are now joining the parade because the additional inflation-risk premium that was integrated into the yield curve this morning has completely dissipated.
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Todayâs auction of 5s was just as dismal as the previous auctions this week. It really looks like the Foreign banks are on a buyers strike. If this is the case (and I think it is highly likely) then the curve is really going to steepen. I remember reading where it was estimated that foreign demand for treasuries was keeping yields 100-200bp lower. This must be why the 10s have increased 50bp since March and swap spreads have NARROWED (and the embi spread over treasuries is at a all-time low). I noticed that yesterday the Sep. par 30yr puts traded 20,000 with a sizable jump in open interest. We may see par much sooner than Labor Day.