MBS Live Recap: Highest Yields in 4 Months

Bond markets were weaker out of the gate this morning as the US got caught up with the rest of the world after a "risk-on" Monday session for most overseas markets.  That means the general strategy was to buy stocks and sell bonds.  Some of the underlying motivation for the "risk-on" sentiment was based on politics, or so it would seem. Stocks have tended to react favorably to pro-Clinton developments, and the most recent debate resulted in better poll numbers for Clinton.  

Beyond that, volatility in currency markets and stronger economic data in Europe only added fuel to the fire.  Shortly after opening for the week, 10yr yields hit their highest level in more than 4 months (1.781).  

Once again, a combination of politics and overseas trading fueled a domestic market move.  Headlines regarding division in the ranks of republicans in Congress reintroduced "uncertainty" to traders' field of vision.  At the same time, European markets were were crashing into the close, with stocks and bond yields both moving substantially lower.  Domestic equities markets joined in the fun with the S&P tanking more than 30 points, peak to trough.  The only so-so performance was in US bond markets, where 10yr yields only managed to make it back down to 1.745 before drifting higher again into the close.