MBS Recover Some Losses Thanks to 3yr Auction

MBS Recover Some Losses Thanks to 3yr Auction

The day began with a strong bond auction in Germany setting the tone in the overnight session.  US traders quickly pushed yields back in the other direction, but only modestly.  Bonds remained sideways to slightly weaker until the 3yr US Treasury auction at 1pm.  It came out very strong (although in large part thanks to the weakness that preceded it).  Nonetheless, it was enough to put the ceiling in for the day as far as yields were concerned--especially shorter term yields.  Due to their shorter duration profile, MBS benefited from the auction more than 10yr Treasuries.