MBS MID-DAY: Stronger Territory, but Under Pressure Ahead of Auction

Bond markets pressed into their strongest territory since the late August flight-to-safety this morning.  10yr yields made it as low as 2.081 before pulling up at the end of the European session.  European influences have been mostly a blessing, though, with German Bunds (Europe's 10yr benchmark) and various European equities indices making the first arguments for a widespread move away from risk.  That's another way of saying "sell stocks, buy bonds."

Global equities markets, including S&P futures followed European equities lower into the 7am hour.  European markets flat-lined at that point and domestic markets maintained the momentum.  The chart below shows the DAX (Germany's main stock index) in green and Bunds in Red, followed by the S&P (futures) in blue and the 10yr yield in yellow.

As can be seen in the chart, European bond traders booked profits into the close and domestic markets were pulled higher in the process.  Treasuries are also nominally wary about the upcoming 7yr Note auction--not because the auction itself is any sort of big deal, but rather because it's the last compulsory piece of debt supply this week (compulsory in that primary dealers are forced to submit bids).