MBS Live Recap: Burden of Proof Shifts to Bond Bulls
The first two trading days of September introduce a somewhat serious threat to the calm, sideways range that dominated the past 3 weeks. Granted, the rate spike in late July introduced a similar threat to the similar sideways range and we lived to tell the tale, but the bond bulls definitely made a weaker showing this time. 10yr yields only spent a few days prodding the floor around 2.80-2.82% in 10yr yields. Back in June/July, yields touched that floor on each of the 4 weeks that the range remained intact.
Today's specific threats came from Brexit-related news and a glut of corporate issuance. A stock sell-off at 9:30am helped bonds find their footing, but it wasn't enough to motivate a bond rally. 10yr yields drifted sideways through the afternoon just over 2.90%--right on the edge of confirming a move up and out of the prevailing range.
Today's general threat is that September is quickly looking like it wants to be a bad month for bonds after August largely played the opposite role. Sometimes this "new month" trading only makes for a few days of momentum that doesn't end up sticking, but at this point, it's safest to assume September is out to get us and leave the burden of proof on bond bulls to show us they're still here.