Bonds End Roughly Unchanged As Market Prices Out Some Risk

Bonds started weaker and gradually worked their way back toward unchanged levels as the day progressed.  MBS outperformed for a change, but largely because Treasuries finally had to take a break from outperforming.  Painting in broad strokes, markets are moving in a "risk-on" direction due to the absence of a major escalation in Ukraine.  This could change, obviously, but until it does, it makes sense for markets to do what they did today.  In fact, most of that movement took place yesterday and overnight.  Today ended up being "sideways confirmation."

Econ Data / Events

  • Fed MBS Buying 10am, 11:30am, 1pm

  • Durable Goods................. 1.6 vs 0.8 (-0.7 prev)
    Durable Goods Cap-Ex...... 0.9 vs 0.5
    Core Annual PCE ..............5.2 vs 5.1  (4.9 Prev)
    Core Monthly PCE ............0.5 vs 0.5  (0.5 Prev)
    Pending Home Sales .........-5.7 vs +1.0
    Consumer Sentiment ........62.8 vs 61.7 

    • Consumer Inflation Expectations
      • 1yr - Down 0.1%
      • 5yr - Down 0.1%
Market Movement Recap
09:39 AM

Weaker overnight, little changed after data, but rallying now at the start of the NYSE session.  MBS outperforming significantly, again, largely as a result of Treasuries underperforming.  Looks like 2.0% technical ceiling was a brief buying opportunity.  10s are up 1.4bps on the day at 1.986 and 3.0 UMBS are up 1 tick (0.03) at 100-09 (100.28).

12:49 PM

Moderate, steady weakness since 11am.  Stocks rising.  Oil declining.  Geopolitical risk being priced out.  10yr yield up 3bps to 2.00 and UMBS 3.0 down an eighth to 100-05 (100.16).

02:48 PM

Decent bounce back for MBS in the PM hours, outperforming Treasuries.  3.0 coupons are up 2 ticks (0.06) while 10yr yields are up 1.8bps to 1.988.