The march higher for FI prices yesterday after the Philly Phed data was and remains (as of this post) impressive. The 5 year future has not had 2 back to back lower sessions since April 11. Like voting for Nixon in '72, no one admits to being a fan. The 3 year note showed strength and the curve stretched a bit after duration led gains earlier in the month. Supply has not been enough to dent the advance. Renewed TBT interest by equity Neanderthals and Bill Gross "wanna-bes" is absorbed easily.
The option market for 10 year notes shows a preponderance of 122 strike open interest. Usually, we would expect prices to gravitate toward that strike today. The market took a peek Thursday, however, and it marked the low. The 5 year responded from levels that were the Dec., Jan., and March highs. Impressive indeed.
And now, a few comments on gold. Planet Money (NPR) conducted a simple experiment. Six months ago they bought a 1 oz. and 1/2 oz. gold coins. The bullion price was about $1300.00. They would sell in 6 months, which was this week. The quoted price is close to $1500.00 and they were offered something roughly 100 dollars above their purchase price. (A significant haircut.) After commissions and taxes, the 100 dollar increase in the metal netted the P-Money team....wait for it... a $43.00 LOSS. The simplistic transaction was part of an experiment on market bubbles. The tests produced stretched upside prices and subsequent crashes in EVERY trial. Even when all participants were told directly that the security was trading well over equilibrium, the price rose further. Bubbles are naturally occurring "normal" phenomenon. In many ways, Gold is just a 4000 year old, regularly erupting, bubble.