Another False Alarm Turns Into Bond Market Beat-Down

If today's bond market behavior wasn't making us cry, we'd just have to laugh.  Not even 24 hours after another volley of analysts and talking heads proclaimed "the top is in for rates!" 10yr yields are closing at the highest levels since late 2018, and mortgage rates are right back in line with the ugly levels seen earlier this week.  Culprits are anything but easy to spot today with the most obvious move coinciding with the 9:30am NYSE open (suggesting a position-driven move, possibly/probably with an eye on de-risking into a 3.5-day weekend).  There was some chatter about Fed and ECB comments, but these didn't line up as well with the drama in terms of timing and volume.  Illiquidity greased the skids.

Econ Data / Events

  • Fed MBS Buying 10am, 11:30am, 1pm

  • Retail Sales  0.5 vs 0.6 f'cast, 0.8 prev
    Jobless Claims  185 vs 171k f'cast, 167k prev

  • ECB announcement
    No rate hikes (as expected)
    Taper timeline/amounts as expected
    rate hikes to follow taper (as expected)

Market Movement Recap
09:05 AM

Modestly stronger overnight, largely in the run up to ECB announcement.  Losing some ground since then with 10yr back into negative territory after being several bps lower.  MBS down 1 tick, but illiquid.

09:43 AM

Additional weakness after 9:30am NYSE open (more focused on US trading than EU trading).  10yr up 4.5bps at 2.747 and MBS down 6 ticks (.19) at 100-15 (100.47)

11:37 AM

More time, more selling.  New lows in MBS, down half a point on the day.  10yr yields up almost 10bps to 2.799.  No distinct individual market movers.