Pakistan Accidentally Becomes Secretary of State

Treasury yields fell because oil dropped because Pakistan might talk to someone about talking to someone else. The chain of causation here requires belief in six impossible things before breakfast.

Oil traders saw a headline about Pakistan—a country that cannot keep its own lights on—mediating peace talks between two nations that have hated each other since 1979. They panic-sold crude. Bond traders saw oil fall and bought Treasuries because that's what the flowchart says to do. Nobody asked why Pakistani diplomacy should move American interest rates. Nobody ever asks.

The report did not say talks were happening. Did not say talks were scheduled. Said Pakistan is "exploring a way" to restart them. Exploring a way. That's not even exploring. That's exploring exploring. Some guy in Islamabad floated an idea at a conference and Bloomberg turned it into a geopolitical event that moved the second-largest bond market on Earth.

Retail traders saw yields drop 4 basis points and opened their charting software. Drew lines connecting the peaks. Posted screenshots with eighteen indicators running. Announced they'd been predicting this exact move since Wednesday. They had not been predicting this exact move since Wednesday. On Wednesday they were predicting the opposite move for completely different reasons that also made no sense.

The fundamental story here is that energy prices might fall if two countries stop threatening each other because a third country nobody mentioned yesterday convinced them to. This will lower inflation expectations. This will make bonds more attractive. This will—and here's where it gets good—have absolutely no bearing on what yields do Monday morning when a different unnamed source tells a different reporter the opposite thing.

The Ten-Year Note closed at 4.31%. It opened at 4.35%. Somewhere a man with a PhD just explained this price action to CNBC using the word geopolitical four times in one sentence.

Pakistan has now done more for your bond portfolio than your financial advisor.

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