Rates Keep Playing Defense Ahead of Volatile, Holiday-Shortened Week

Wednesday's Fed Minutes might have served as an inflection point of sorts for the bond market.  Thursday didn't get too much weaker and trading was very flat.  If today managed modest gains, the takeaway could have been fairly positive.  Instead, bonds continued to weaken today as traders battened down the hatches against a gathering storm of volatility next week.  Between the 3.5 days of trading, CPI data, Treasury auction cycle, and the ECB announcement, that probably makes good enough sense.  At the very least, it's enough to classify today's sell-off as a byproduct of things we can see as opposed to an ill omen about things we can't.

Econ Data / Events

  • Fed MBS Buying 10am, 11:30am, 1pm

  • Jobless Claims 166 vs 200 f'cast, 171 prev

Market Movement Recap
08:51 AM

Moderately weaker overnight with additional selling pressure after 8:30am.  10yr yield up 4.4 bps to 2.71.  UMBS 4.0 down half a point at 100-16 (100.5). 

10:26 AM

A bit of additional weakness into 9:10am, but recovering since then.  10yr up "only" 3bps now at 2.696 and MBS down just over a quarter point.

12:55 PM

MBS off their better levels now as volume starts drying up in the PM hours.  4.0 coupons down 10 ticks (.31) at 100-21 (100.66).  10yr yield up 4.6 bps at 2.711.

04:18 PM

Late day leakage in MBS resulting in scattered negative reprices.  Prices are down roughly 3/8ths, and just over an eighth of a point from the mid-day plateau.  10s are unchanged from the last update.