MBS RECAP: Not The Worst Day of the Year, but Close!

Bond markets moved back toward the higher end of their recent yield range today--and indeed, the highest pivot point in 2015.  10yr yields have only been higher at 5pm on 2 other days this year.  All this without any amazing breakthrough in Greece.  In fact, if anything, the two sides moved farther apart today.  It's almost as if markets are basing trading decisions on something other than just Greece's on-again-off-again debt deal. 

Thank goodness my Day Ahead commentary got through to the right people.  I saw a lot of reference to "headline exhaustion" today after weeks of incessant hyperfocus on Greece-related headlines.  Unfortunately, focusing on Greece would have helped today.

Instead, we were left to trade the economic data, the Treasury auction, and whatever else.  Starting with the economic data, the conclusion is that it wasn't traded.  Literally, there was no reaction to the PCE or Jobless Claims releases in the charts.  Skipping ahead to the "whatever else," we saw late momentum in Europe make its way into US bond markets to some small extent, this combined with the typically weaker pre-auction environment to take US bond markets to their weakest levels of the day.

Once Europe closed, the selling stopped and we waited for the auction.  After fairly strong results, bonds rallied back to the best levels of the day, but didn't really attempt to break any lower in yield.   Things feel ominous here.