MBS Outperform as Treasuries Fret Over Issuance

As Thursday's CPI looms on the horizon as this week's defining moment for the bond market, traders are passing the time by fretting over issuance concerns.  Issuance, in this case, refers both to the regularly scheduled Treasury auction cycle as well as the somewhat variable slate of corporate bond issuance that always waxes and wanes in the background.  Corporate supply ramped up to start the holiday-shortened week, resulting in Treasury underperformance (Treasury's serve as the index for corporate bond yields) and MBS outperformance. All the weakness was contained by the range in the bigger picture with breakouts more likely after CPI.

Econ Data / Events
    • Nonfarm Payrolls
      • 261k vs 200k f'cast
      • last month revised to 315k from 263k
    • Unemployment Rate
      • 3.7 vs 3.6 f'cast, 3.5 prev
    • Earnings
      • 0.4 vs 0.3 f'cast/prev
    • Labor Force Participation Rate
      • 62.2 vs 62.3 prev
Market Movement Recap
09:10 AM

mixed overnight with best levels at 730am.  Sellers show up at 8:20am CME open, undoing the gains.  Currently unchanged in Treasuries and an eighth of a point weaker in MBS.

10:57 AM

Additional weakness just before 10am with corporate bond issuance leading to a technical break above the 4.17% technical level (currently up 3bps at 4.19+).  MBS are down roughly 6 ticks (.19), but were briefly down nearly half a point.

02:58 PM

Very flat at slightly weaker levels.  Treasuries underperforming since the last update with 10yr now up 4.4bps at 4.209.  MBS still down 6 ticks