Bonds Surprised by Supply Even Though They Knew Supply Was Coming

Whether in reference to the regularly scheduled Treasury auction cycle or the variable pipeline of corporate bond issuance, the notion of "supply" played a key role in today's bond market weakness. How does that happen when bonds know they're going to see supply ahead of time?  The biggest reason is precisely that "variable" nature of the corporate pipeline.  Bottom line, it turned out to be way more than expected.  The issuance glut hit a market that lacked the volume and liquidity to deal with it.  At the same time, several other factors compounded the weakness and the day quickly became "sell first, ask questions later."

Econ Data / Events
Market Movement Recap
08:40 AM

Sellers lined up at 8:20am CME open, adding to modest overnight weakness.  10yr up 3.3bps at 2.975 and MBS down 6 ticks (.19) at 99-19 (99.59).

10:12 AM

Additional weakness after 9:30am NYSE open (compounded by corporate issuance).  10yr up more than 5bps at 2.992 and MBS down roughly a quarter point.

12:52 PM

Weakest levels of the day just after noon.  MBS down half a point at 99-09 (99.28).  10yr yields are up 8.5bps at 3.025%.

03:53 PM

New lows of the day for MBS, now down 5/8ths of a point at 99-05 (99.16).  10yr yields are near their highs, up 9.9bps at 3.04.