Recent Gains Could Simply Be a Correction. Data Will Decide

Bonds may have moved into stronger territory today (near the best levels in 2 weeks), but that might not have happened without a much bigger rally in European bond markets following the European Central Bank (ECB) announcement.  The timing made it hard to sort out those impacts from the potential influence of internal components of the GDP and Durable Goods data.  Either way, bonds have effectively corrected the overdone selling spree from late last week and should shift to a more data-dependent stance from here.

Econ Data / Events
    • GDP (Q3, advance)
      • 2.6 vs 2.4 f'cast, -0.6 prev
    • Jobless Claims
      • 217k vs 220k f'cast, 214k prev
    • Durable Goods
      • 0.4 vs 0.6 f'cast, 0.2 prev
    • Durable Goods Nondefense, excluding aircraft
      • -0.7 vs +0.5 f'cast, +0.8 prev 
Market Movement Recap
08:43 AM

Moderately weaker overnight with 10yr yields as high as 4.086.  Slight recovery after ECB and data. 10s hit 4.02 then bounced back up to 4.05 and are now range finding in between.  MBS are down a quarter point, but still illiquid. 

09:19 AM

More gains on dovish ECB comments and downgraded rate hike expectations via Fed Funds Futures.  10yr down 4bps at 3.968 and MBS up at least an eighth of a point. 

12:39 PM

Pulling back a bit in the PM with MBS down just under a quarter point from the AM highs.  10yr yields still down 5.5bps on the day, but up to 3.952 from lows of 3.91.

01:33 PM

Some additional weakness after soft 7yr Treasury auction, but bonds bounced back to pre-auction levels shortly thereafter. That bounce hasn't been extended.  Bonds are still off their best levels, but not in any kind of disconcerting selling pattern. 

03:23 PM

Reasonably flat since the last update with MBS still up just under half a point and 10yr yields down 5.5bps at 3.952.