Treasury Auction Helps Bonds Hold The Range

If yesterday was a placeholder ahead of bigger ticket events, and if those bigger ticket events arrive on Wednesday, then Tuesday couldn't possibly be anything other than a placeholder as well.  That said, it was a more interesting placeholder with some friendly volatility delivered by a strong showing at the 10yr Treasury auction.  In some regard, the bond market's willingness to bid aggressively at this auction (with CPI and the Fed coming up the following morning) might confirm something about the underlying bullish predisposition discussed last week.  But then, as now, the catch is that a bullish predisposition still requires confirmation in the data.  On that note, all eyes on Wednesday's CPI.

Econ Data / Events
    • 10yr Treasury auction
      • 4.438 vs 4.458 expectations
    • bid to cover
      • 2.67 vs 2.49 avg
Market Movement Recap
10:08 AM

Stronger overnight with a modest pull-back around 9am.  10yr down 3.2bps at 4.451.  MBS up an eighth of a point.

12:31 PM

Weakest levels of the day ahead of Treasury auction.  MBS unchanged and 10yr down 2bps at 4.463.

01:03 PM

Solid gains after 10yr Treasury auction.  10yr down 5.2bps at 4.434.  MBS up an eighth in 6.0 coupons. 

03:13 PM

Best levels of the day for Treasuries with 10yr down 7bps at 4.414.  MBS are nearly back to opening highs, up 6 ticks (.19).