Bonds Brace For Election Results

It was an interesting round trip for the bond market today as overnight weakness gave way to even higher yields after the ISM Services PMI.  ISM was legitimately stronger than expected, and other than the direction of the move, it was good to see bonds remaining willing to react to econ data.  But there was a greater willingness to react to "other things" in the afternoon.  One of those may have been a well-received Treasury auction considering yields dropped shortly thereafter.  A separate move in the 2pm hour accounted for an even bigger rally, and that's the one without any clear scapegoat.  Chalk it up to pre-election positioning and count on substantially bigger volatility tomorrow.

Econ Data / Events
    • S&P Services PMI
      • 55.0 vs 55.3 f'cast, 55.2 prev
    • ISM Services
      • 56.0 vs 53.8 f'cast, 54.9 prev
      • employment 54.0 vs 48.0
      • Prices 58.1 vs 58.0
Market Movement Recap
10:16 AM

Weaker overnight and selling more after data.  MBS down a quarter point and 10yr up 6.9bps at 4.354

01:03 PM

Decent 10yr auction, but not a big market mover.  10yr up 5.6bps at 4.34% and MBS down 2 ticks (.06).

02:08 PM

Better gains now.  MBS unchanged and 10yr up only 3.3bps at 4.318

04:50 PM

Fully recovered now, and then some.  MBS up 9 ticks (.28) and 10yr down half a bp at 4.28.