Risk aversion isn't push down yields, just the opposite
For the past decade, if you were to send equities down 3% you can almost guarantee that Treasury yields would be lower.
Today though, US 10-year yields are 5.7 bps higher to 0.69% while 30s are up 7.1 bps to 1.43%.
The easy answer is that there was a story yesterday in China's Global Times suggesting Beijing will sell more Treasuries. Alternatively, the drop in unemployment today makes the Fed less likely to surprise in September. Maybe it's that simple but I'm skeptical.
Conversely, yields were also falling last week even as equities surged. It could just be that bonds were ahead of the curve and that equities after flailing around in an option-fueled speculative frenzy.
Finally, there is a fairly strong bearish seasonal trend in bonds (i.e. higher yields) starting about mid-month in September and running until year-end. That could be coming into play.
Finally, it's a US long weekend and the moves in bonds could be a simple flow and positioning story. We're not sure why it's not an early close in bonds today ahead of the holiday but we'll take the excitement however we can get it.
Ultimately, there's no easy answer here but any time correlations breakdown and reverse, it argues for some extra caution.
