What's the story with bonds?
It was again the biggest subject over the weekend. How to explain the continuing drop in yields?
Some keep citing the flight to safety trade, partly on Russia and Ukraine's ongoing tensions. There are likely a lot of hedge funds in bonds after the beating they took in March and April. Others think it has just been a massive macro short squeeze, because the biggest trade coming into 2014 was to short bonds.
A separate few insist that the message is that growth will not be nearly as strong as many think.
U.S. Treasurys
Meanwhile, what to make of the rally in European bonds? It's tough to get higher yields when European rates are dropping dramatically—whether it's on slower euro zone growth or worries over the impact of the Ukraine crisis. I've heard some traders speculate that the same people who are buying these southern European bonds may also be buying U.S. Treasuries as a hedge.
One article being passed around today says there is a shortage of supply of government bonds, because new rules designed to help pension funds plug there shortfalls may force them to buy longer-dated Treasuries, creating a shortage in the coming few years.
The bottom line, however, may be that inflation is still very low in the U.S. and Europe, and central banks are remaining very accomodative. One trader noted that the balance sheets of the Federal Reserve and the Bank of Japan increased $125 billion in April, and will likely increase $115 billion in May.
Low inflation, geopolitical uncertainty, safe haven bid: take your pick, yields will still be heading lower.
Elsewhere
1. JPMorgan Chase's stock is sinking more than two percent in early trading, after warning in a regulatory filing on Friday that it expects a further downturn in trading revenue in the second quarter. The bank now expects revenue from activities such as fixed-income and equities trading to tumble 20 percent year over year.
Markets revenue decreased 17 percent in the first quarter of the year, driven primarily by a drop in JPMorgan's fixed-income currencies and commodities unit. Bottom line: the first quarter's (Q1) softness is spilling over into Q2, and this is negative for the large banks in general. Separately, Nomura lowered its Q2 estimates to $1.26 from $1.34.
Evercore estimates that a similar 20 percent decline in trading could move Bank of America earnings from 31 cents to 29 cents, and Citigroup from $1.26 to $1.20. Note that Goldman Sachs gets roughly 20 to 25 percent of its revenue from fixed income, commodities, and currency trading.
2. Once again, China's manufacturing numbers came in below expectations. Elsewhere, Japan and London markets are closed. There will be a European Central Bank meeting Thursday, against a backdrop of the European Union cutting its growth forecasts in Europe.
--By CNBC's Bob Pisani