Decent Day, But There's a Catch

Bonds improved today!  The rally was moderate by typical standards, but it feels like a huge victory in light of the 2yr highs in rates seen yesterday.  It's not very different from last week's resilience.  At the time, we were concerned that it could be a trap (or at least cognizant of the possibility).  This time around, the same reminders are in order.  It's pretty much that simple until and unless we see a much bigger push toward lower yields/rates.  Even then, we need to see how bonds are doing after next week's Fed announcement before considering any tweaks to the early 2022 rising rate narrative.

Econ Data / Events

  • Fed MBS Buying 10am, 11:30am, 1pm

  • Housing Starts.......1.702m vs 1.65m f'cast, 1.678m prev
    Building Permits ....1.873m vs 1.701m f'cast, 1.717m prev

Market Movement Recap
08:28 AM

Flat to slightly weaker overnight with pressure from Europe at 2am.  A bit of a recovery since then with better buying at 8am.  10yr yield half a bp lower at 1.87 and 3.0 UMBS up 6 ticks (.19).

10:02 AM

Resilience/gains continue with 10yr down 2.5bps at 1.85--the lows of the day.  UMBS 3.0 coupons are up nearly 3/8ths of a point.

01:08 PM

Modest additional gains after strong 20yr bond auction.  10yr down more than 4bps at 1.832 and MBS up more than 3/8ths of a point.

03:10 PM

Similar levels to last update at the 3pm close.  The day has been a gradual rally from the outset with gains plateauing in the the PM hours.