Please Fasten Your Seatbelts, we are About to hit Some Turbulence

From yesterday's Across the Curve blog:

Prices of Treasury coupon securities tumbled today as investors drowned themselves in the spittle of never ending Treasury issuance. From the perspective of bond traders the recovery in the stock market added to the woes of the fixed income markets. We are approaching a junction at which fundamental economic data does not matter. On Monday the equity markets broke to multi year lows and bonds could not break out of their malaise. Yesterday confidence was at 40 year lows and today existing home sales disappointed. None of that mattered to bond traders who are always poised for the next round of supply.

Translated: Treasuries, the instruments by which the Federal government borrows money, are no longer reacting to external stimuli. When news is bad and getting worse, prices of Treasuries should climb because people are getting out of the risky stock market in favor of Treasuries. When bad news no longer drives the prices down, and yesterday's news about home sales was really bad, it's because there are more Treasuries to buy than buyers want. The supply of the things, that is the size of the Federal deficit, has become the dominant factor.

And it's just starting.