MBS MID-DAY: Methodical Selling Spree Continues

I made a reference to the methodical nature of the recent bond market weakness in this morning's commentary.  Today's trading has simply marked a continuation of that same theme.  Bond markets know where they're going (approximately), and continue taking measured steps in getting there.

The latest installment sees 10yr yields inching up another few bps to highs of 2.263 today.  It's no coincidence that we're seeing these levels a day before tomorrow's nonfarm payrolls data.  2.26-2.28 is the first important pivot point we discussed after last week's sell-off picked up steam.  When 10's broke through 2.13, I said that 2.27 would be the next level that could serve as a potential entry point for traders looking to reenter the bond market as buyers.

That said, it will take quite some doing for them to actually push rates back down.  NFP would have to be way weaker than it's likely to be, but never say never. 

The point is not to say "this is where bond markets bounce," but rather, this is a logical place for bond markets to level-off in advance of tomorrow's data.  Today's data hasn't really made any difference in that reality.  Jobless Claims were weaker than expected and productivity was significantly stronger than expected, yet there was no discernible reaction to the data.  Momentum from the 8:20am CME open hit a wall when bonds broke even and the sellers have been in control ever since.  That said, the pace has been manageable.  Again, that's what we'd expect from the aforementioned 'methodical' sell-off.