Surprisingly Strong Day Leaves Yields at Fresh Lows

Nothing good happened for the bond market today--at least not in terms of economic data coming in weaker or Fed speakers saying new and supportive things.  In fact, the economic data was biased toward strength--especially if you ask Consumer Confidence at 110.7 vs 101 previously.  Top that off with a modest miss in the 20yr bond auction and there was really and truly no great reason for bonds to improve during domestic hours.  Nonetheless, the U.S.-only trading hours saw the best gains of the day as 10s rallied under 3.85% in the afternoon.  That leaves us grasping at the same straws we set out for ourselves last week: i.e. an inconsistent year-end trading environment in which lighter volume/liquidity make for bigger-than-normal moves in response to compulsory year-end trading needs.  The ball happened to bounce our way today.  It could have gone either way.

Econ Data / Events
    • Existing Home Sales
      • 3.82m vs 3.77m f'cast, 3.79m prev
    • Consumer Confidence
      • 110.7 vs 104 f'cast, 101 prev
Market Movement Recap
10:05 AM

Steadily stronger throughout the overnight session. Modest bounce at 9am.  MBS still up 2 ticks (.06) and 10yr down 3.3bps at 3.898

10:32 AM

More modest losses after stronger consumer confidence.  10yr still down 2.6bps at 3.905, but at highs of the day.  MBS still up 3 ticks (.09) but at lows of the day.

04:14 PM

modest weakness giving way to moderate strength in the PM hours despite weaker Treasury auction.  10yr down 7.4bps at 3.857.  MBS up 5 ticks (.16).