Plenty of Rate Volatility Despite Holiday-Shortened Week

This week got off to a late start as markets were closed on Monday for Memorial Day. Upon returning to the office, traders began pushing rates higher almost immediately. It's often said that the bond market can experience elevated, seemingly random volatility amid the lighter trading participation seen on the days surrounding 3-day weekends.  Tuesday may have been a good example as it brought the biggest move of the week despite an absence of high consequence data. That's not to say that data was completely absent.  Traders digested comments from several Fed speakers with the most memorable example coming from Minneapolis Fed's Kashkari who said he'd need to see "many" more months of good inflation data before the Fed would consider cutting rates.  This is a departure from the average Fed speaker who uses words like "several" to discuss the same dependency.   In addition to Fed comments, there was a condensed schedule of Treasury auctions.  These regularly scheduled auctions account for the "supply" side of supply and demand in the bond market.  Higher supply means lower prices and higher rates, all other things being equal.  In this case, the amount of supply is published well in advance, but the auction process provides a temperature check for investor demand.  The relatively lower demand at this week's auctions also played a role in pushing rates higher in the first two days. Things began to improve on Thursday--not only because auctions were over, but also due to rate-friendly revisions in the quarterly GDP data.  Finally, Friday's PCE inflation data helped add momentum to Thursday's recovery.