MBS RECAP: Steadily Weaker All Day, but for no Particular Reason

Bond markets simply *were* weaker today.  Certainly, there was no overt reason for this, and the less obvious reasons are open to debate.  Even if we could assign perfect measures of blame to various factors, trading was so sparse today that we can't really assume we were looking at a representative sample of sentiment.  Things could be better or worse when participation picks up (likely tomorrow).

As for the factors in question, there aren't many.  A general pull-back in the risk tone overnight is part of the equation.  All that means is that global financial markets showed fewer signs of being preoccupied with European contagion, allowing stocks to improve a bit and bond yields to move slightly higher.

Beyond that, there were a few big trades that stood out on the slow day, prompting other traders to follow suit.  And finally, the technical outlook was at risk of turning negative for bonds on Friday.  The morning weakness confirmed that and helped keep a very small amount of negative momentum intact.