Europe Driving Gains While US Bonds Resist

Today's big story is the European bond market's reaction to the European Central Bank (ECB) announcement.  The hike was as-expected, but the ECB also said the next rate hike is already locked in for March at which point it will reevaluate.  That reevaluation means a pivot toward smaller rate hikes followed by a pivot to no rate hikes.  And if you ask markets, there will then be a pivot to rate cuts as early as Q4 2023.  Traders see the pre-commitment for March's hike as evidence that the dovish shift has begun.  The result is a massive rally in EU bonds--far too big for US bonds to try to match.  In fact, 10yr yields are rallying at a mere quarter of the EU 10yr pace. The caveat is that US 10s got in quite a bit of rallying yesterday while EU bonds were already done for the day.  If we use the same 30bps of y-axis range for both, the net effect is only slightly lopsided in EU bonds' favor. The gains mean the prevailing range (which had bottomed out at 3.40-3.42) has been broken yet again.  This happened a few weeks ago as well, but it didn't stick.  Things look more serious this time, so it makes sense to consider subsequent technical targets.  3.31 jumps off the page as the absolute intraday low from January 19th.   3.25 gets the nod, and probably always will, due to its role as a ceiling level in late 2018. 
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