MBS MID-DAY: Bond Markets on Cruise Control, Holding Range and Little-Changed

Domestic bond markets are as quiet as quiet can be today.  The silence was most deafening at the start of the overnight session where the range was even more narrow than it has been during domestic hours.  Later in the overnight session, German Bunds (the benchmark for the European bond market) began losing ground.  The apparent cause was a personnel shake-up in the Greek finance ministry.  While that seems like a fairly big stretch in terms of causing detectable market movement, the rise in German yields was accompanied by a noticeable drop in Greek yields.  Add to that the fact that nothing much is going and it's certainly possible.

Either way, the weaker move in Europe spilled over into US bond markets, though not at a 1:1 ratio.  This accounted for lower prices and higher yields early in the domestic session for MBS and Treasuries, but as European yields have leveled off, domestic markets have bounced back as well.  MBS and Treasuries are both now back within striking distance of 'unchanged' on the day.  Stocks have generally been sliding since the NYSE opening bell, and those flows may also be helping stabilize bond markets.

Beyond that, volume and participation are simply very very small--almost nonexistent.  The numbers are more in line with a holiday-week trading session.