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Analysts at BBH explain that the US 10-year yield fell from 3.12% on May 18 to a low a little below 2.76% at the start of last week as the risk of an existential crisis in the eurozone seemed to escalate.  

Key Quotes

“As European politics stabilized and the US reported data, lending credence to ideas the world’s largest economy has re-accelerated in Q2, US yields rose back above 2.90% ahead of the weekend.   Additional near-term recovery in yields looks likely.   The June note futures rallied from 118-10 on May 17 to a high of 121-12 on May 30.   By the end of the week, it had retraced half of the rally (@119-27).   The 61.8% retracement is at 119-16, which is also where the 20-day moving average is found.”

“The net short speculative position in the 10-year note futures rose to a new record high of 471k contracts.    It was an increase of 112.4k contracts,   snapping a four-week decline.   It reflected the bulls liquidating nearly 70k contracts, bringing the gross long position down to 640.5k contracts.   The bears added another nearly 43k to their gross short position,   lifting it to a new record high of 1.11mln.   At the end of last year, it a little below 720k contracts.”

“In three of last week’s four S&P sessions, the close represented a change of more than 1%.    The VIX rose from a low of 12.3% on May 25 to a high of nearly 18.8 on May 29.   It finished near 13.4, which is practically unchanged for the third consecutive week.   The S&P 500 made new highs for the week ahead of the weekend, and although it closed well (~2734 just off session highs),   the 2750 area needs to be overcome to lift the technical tone.”