Bonds Not Catching a Break From Strong Auction or Lower Oil Prices

Oil prices fell today today and the bond market underwrote its final big Treasury auction for the week.  Even so, bond yields moved moderately higher with the 10yr hitting 2.021 briefly.  Today's tone was largely set by the European Central Bank announcement.  The ECB came off slightly more hawkish than markets expected, especially with respect to its tapering time frame.  Treasuries remained under pressure until EU bonds closed and only recovered modestly after that.  MBS kept pace with the losses, thus pushing mortgage rates to their highest levels in nearly 3 years.

Econ Data / Events

  • Fed MBS Buying 10am, 11:30am, 1pm

  • Core CPI y/y 6.4 vs 6.4 f'cast, 6.0 prev
    Jobless Claims 227 vs 217 f'cast, 216 prev

Market Movement Recap
08:26 AM

Weaker after ECB speeds up bond-buying wind-down. Now waiting on CPI.  10yr up 3bps at 1.981.  MBS down a quarter point.

08:41 AM

Modest friendly bounce after CPI. Bonds tried and failed to turn green.  10yr up 2.3bps at 1.974 and MBS down an eighth. 

12:15 PM

Weakest levels of the day just after 10am and holding in that territory since then.  EU bond weakness at first, then 9:30am NYSE tradeflows.  10yr up 6 bps at 2.01%.  MBS down 3/8ths.

03:58 PM

Bonds have managed to claw back a few bps of the day's losses with the most visible turning point being the close of European trading.  10yr up 3.7bps at 1.988 and UMBS 3.0 coupons down 10 ticks (0.31) at 99-29 (99.91).