MBS MID-DAY: Bond Markets Tuned in to Stock Volatility

It's one thing for bond markets to ignore stock markets when the latter is moving less than a quarter of a percent day-over-day.  That's been the case on most days, but today, S&P futures fell a full percentage point from morning levels.  These uncommonly big moves are rarely ignored by bonds and today is no exception. 

After rising to the highs of the day following this morning's European Central Bank press conference, 10yr yields followed stocks lower into the noon hour.  The most popular theory behind the stock sell-off is a deluge of tweets ("twit storm?") suggesting Chinese military vehicles in Hong Kong.  That coincided with an official statement from Hong Kong leadership warning of serious consequences for protesters occupying government buildings.

Both Treasuries and MBS temporarily broke even on the day before stocks bounced.  They're now back to holding slightly weaker levels (which are still much much better than Tuesday afternoon's closing levels).  It's as yet unclear as to whether equities will make another run to the lows.  If they do, it looks like bond markets are ready to pick up the pieces of any pronounced sell-off.