Why We Saw Steady Selling All Day

We expected volatility would pick up on Tuesday for one reason or another and it did not disappoint. Sadly, the direction of the movement was disappointing as bonds sold off steadily virtually all day. While there was a bit of selling after the job openings data at 10am ET, the bulk of the weakness is likely due to additional quarter-end position squaring and rebalancing (the same thing that helped bonds last Wednesday). This is mechanical, emotionless, non-reactive trading conducted simply to dial in certain levels of bond holdings to match investment portfolio benchmarks and/or stock/bond allocation percentages. Most of it has already come and gone for Q2, but it doesn't take much to move the needle amid thin summertime volumes. Just the way the ball bounced today...

Econ Data / Events
    • Case Shiller Home Prices-20 y/y (Apr)
      • 1.1% vs 0.9% f'cast, 0.8% prev
    • CaseShiller 20 mm nsa (Apr)
      • 1.0% vs -- f'cast, 1% prev
    • FHFA Home Price Index m/m (Apr)
      • -0.1% vs 0.2% f'cast, 0.1% prev
    • FHFA Home Prices y/y (Apr)
      • 2.0% vs -- f'cast, 1.7% prev
    • Chicago PMI
      • 56.7 vs 56.0 f'cast
    • USA JOLTS Job Openings (May)
      • 7.594M vs 7.30M f'cast, 7.618M prev
    • Consumer Confidence
      • 91.2 vs 94.7 f'cast, 93.1 prev
Market Movement Recap
08:48 AM

Initially stronger overnight with moderate selling just before the open. MBS down 2 ticks (.06) and 10yr up 1.5bps at 4.391

10:16 AM

Weaker after JOLTS, but stabilizing now. MBS down an eighth and 10yr up 2.2bps at 4.397

01:47 PM

Weakest levels. MBS down 6 ticks (.19) and 10yr up 3.5bps at 4.41