MBS MID-DAY: Slow Morning for Bonds, but Holding Ground Despite External Pressures

Bond markets are having an exceptionally uneventful morning, trading in a narrow, slightly stronger range for the most part.  This was the case right from the start of the overnight session, and continued to be the case despite rising German Bund yields.  The extent to which the normal level of correlation has broken down is something we usually only see when Bunds are rallying better than Treasuries.  For instance, Treasuries didn't improve too much when Bunds were rocketing to new all time lows as the ECB began buying in early March, but  they weakened at a similar pace when that move was over.

In addition to the rising Bund yields, stocks have also been moving higher.  The sharper move occurred right after the opening bell, and that's the only time we've really seen bonds make any gesture toward higher yields (or MBS toward lower prices).  For a moment or two, trading levels were edging close to implying negative reprice risk, but have since pulled back to keep us in positive territory. 

The only relevant data of the morning was Existing Home Sales, which could be taken positively or negatively depending on who's spinning it.  The negative reading (albeit slight) is the most obvious as the 4.88 million unit annual pace fell short of the 4.90 forecast.  Apart from that, there are several positives to point to, including the fact that this marks the 5th consecutive month with positive year-over-year growth and the best year-over-year growth since late 2013.  These "yeah buts" could help explain some of the bond market pressure after 10am, when the data came out.