MBS Live Recap: Mostly Weaker, Bonds Battle Back on Korea Headlines

Bonds began the day in moderately weaker territory and continued to lose ground through the early afternoon.  After consolidating in extreme fashion over the past 2 weeks, stocks finally popped higher.  This is one of the few cases where I'm happy to give the stock movement some credit for the modest reaction in bonds.  It was right about that time that S&P futures were breaking out of their consolidation range that a big sale hit the CME in 10yr Treasury Futures, resulting in the weakest move of the day heading into 11:30am.

Bonds began to recover on their own, and for no great reason other than technical ceilings were hit, the EU bond market closed, and $/yen reversed course.  The 3yr Treasury auction added to the gains with an exceptionally strong showing, but the reaction lasted a mere 10 minutes before sellers pounced on the opportunity to get out at slightly better prices.

Yields were drifting back toward the highs of the day when geopolitical headlines took a bite out of stocks (Trump threatening North Korea with "fire and fury."  Bonds improved, but remained in weaker territory on the day.