No Bad News in Today's Treasury Announcement

There have been a few occasions in the past few years where Treasury's quarterly refunding announcement sent shockwaves through the bond market.  Today turned out not to be one of them.  Treasury showed traders the light at the end of the issuance tunnel late last year (part of the reason for the big rally in November) and now we're simply seeing the general fruition of those predictions.  In fact, the Q3 borrowing estimate was more than $100bln LOWER than last time.  Markets don't have a perfect way to predict how these estimates will change quarter to quarter, but the trading reaction tells us it was only a very small surprise, but also a pleasant one.

Market Movement Recap
10:13 AM

Modestly stronger overnight.  10yr down 2.3bps at 4.173.  MBS up 1 tick (.03).

12:15 PM

MBS near lows, unchanged on the day.  10yr still down 1.6bps at 4.18

02:40 PM

Sideways since 11am.  10yr down 2bps at 4.175.  MBS up 1 tick (.03).

03:10 PM

Small improvement after Treasury refunding announcement.  MBS up 2 ticks and 10yr down 2.8bps at 4.168.