Mini Snowball Rally on Data, Technicals, and Lack of Supply

There are several ways to approach today's rally in Treasuries, but the simplest would be to focus on the uncommonly strong reaction to the Q3 Labor Costs data (2.4 vs 3.1 f'cast, and 3.5 previously). This prompted a break below the 3.5% technical level which brought in more buyers.  Throw in a little mid-morning nuclear threat from Putin for good measure.  Mix that with an ongoing dearth of Treasury/corporate supply, and you have the makings of a modestly-sized short squeeze that creates a but of a snowball rally for bonds.  All that having been said, it was the AM data that served as the single obvious event that initially pushed the snowball. 

Econ Data / Events
    • Q3 Labor Costs
      • 2.4 vs 3.1 f'cast, 3.5 prev
Market Movement Recap
09:02 AM

Slightly weaker overnight but quickly moving into positive territory after much softer Unit Labor Cost numbers.  MBS up almost a quarter point.  10yr yield down 6.2bps at 3.47 (getting a boost from the technical break of 3.5).

11:26 AM

Decent little bull run after Bank of Canada announcement and a nuclear threat from Putin at 10am and 10:10am respectively.  Mostly unwound now.  10yr down 5.7bps at 3.473.  MBS up an eighth of a point after being up more than a quarter earlier.

03:48 PM

Snowball rally into the 3pm close on short-covering and a dearth of any sort of supply.  10yr down more than 10bps even after a small bounce, currently 3.422.  MBS up more than a quarter point now, but having some liquidity challenges this afternoon.