Mixed Day For Bonds, But Same Opportunities (And Risks) Remain

The day began fairly well for the bond market with modest gains overnight and limited drama for most of the domestic session.  After the 3pm close (also month/quarter-end in this case) buyers clocked out early and MBS lost more than an eighth of a point.  Relative to the levels seen earlier in the week, this keeps hope alive that bonds are attempting to level-off in the bigger picture.  The risk is that we merely witnessed bonds leveling off at the end of the month/quarter due to month/quarter-end tradeflows.  That makes the next few days interesting, important, and potentially informative when it comes to feeling out the bigger-picture trend.

Econ Data / Events

  • Fed MBS Buying 10am, 11:30am, 1pm

  • Core PCE Inflation (y/y) ....5.4 vs 5.5 fcast, 5.2 prev
    Jobless Claims................. 202 vs 197 f'cast, 188 prev

Market Movement Recap
08:58 AM

Moderately stronger overnight with no particular theme in play.  An early EU bond rally helped.  No initial reaction to data, but bonds moving off best levels about 15 minutes later.  10yr down 2.2bps at 2.336, MBS up an eighth.

12:06 PM

Flat and boring after bonds arrested an initial weakening trend into the 10am hour.  10yr outperforming MBS.  4.0 coupons up 2 ticks (0.06) and 10yr down 3.5 bps. 

03:39 PM

3.5 coupons at the lows of the day, but illiquidity is an issue.  Prices could be anywhere from -1 to +1 tick (-0.03 to +0.03) depending on the moment. 10yr yields are down 3.6bps at 2.322.

04:31 PM

more illiquidity and a bit more weakness with MBS down to new lows (but just barely).  10yr yields aren't yet back above the AM highs at 2.347, but they're close enough (2.343).  No rhyme or reason--just month-end tradeflows doing their thing.