What's Up With Today's Massive Snowball Sell-Off?

Seemingly out of the blue, and without any clear connection to headlines or data, bond yields spiked relentlessly just after 9am this morning.  There were several potential contributors in play at the time, but none of them big enough to explain the entire move.  Considering the short end of the yield curve took far more damage than the long end, the best explanations are those that focus on the ongoing reprice of Fed policy expectations.  Several trade desk updates and Fed speakers added fuel to that fire around the same time as today's rate spike, but at a certain point, stop-loss levels were triggered and the snowball began to roll with self-sustaining momentum.  

Econ Data / Events

  • Fed MBS Buying 10am, 11:30am, 1pm

  • Pending Home Sales ......-4.1 vs +1.0 f'cast, -5.8 prev
    Consumer Sentiment.....  59.4 vs 59.7 f'cast, prev
    Inflation Expectations ..... unchanged from previous

Market Movement Recap
09:05 AM

weird, narrow, low volume, choppy, sideways overnight session with 10yr yields bouncing back and forth between 2.37+ and 2.35+ multiple times.  Currently unchanged at 2.37%.  MBS are down just a hair, but liquidity is enough of an issue that 3.5 coupons could also be closer to unchanged (when liquidity improves).

10:44 AM

Sharp weakness between 9 and 930am ET.  Very little by way of concrete explanation (discussed in the alert HERE).  10yr up 10bps to 2.47+ now and MBS down more than half a point.

02:59 PM

Fairly flat since the last update with no major attempt to push back toward stronger levels.  MBS are roughly 3/4ths of a point lower and 10yr yields are up 12+ bps at 2.49%