MBS MID-DAY: Bonds Under Slight Pressure After Stock Rally

Bond markets were weaker during the overnight session--at least at first.  The easiest scapegoat for that weakness was the less-than-awful GDP print in China.  It was 0.1 lower than last time and 0.1 higher than forecast (6.9 vs 6.8).  10yr yields rose about 4bps right out of the gate, but quickly began to recover when Chinese equities markets topped out.

A similar pattern of weakness and recovery began at the start of the European session.  This time around the recovery didn't happen right away.  MBS and Treasuries were just starting to recover as the domestic session began.  Stocks joined in the move (weakening as bonds rallied).

The NAHB data came out stronger than expected at 10am.  Builder Confidence stood at 64 (versus a median forecast of 62), the highest level in exactly 10 years.  At the same time, bonds began selling off again.  It looked like it was related to the data.  Indeed the data may have ADDED to the weakness, but it was initially a factor of stocks finding their footing about 10 minutes earlier.  We've since lost some more ground and gained it back, with both Treasuries and MBS just slightly into positive territory.