Lock Decisions Still Hinge on Adverse Market Fee

The bond market had a decent showing today, ultimately rallying back into positive territory after a weaker start.  We could agonize over what amounts to extremely small volatility inside a sideways range or simply lock anything we can before the adverse market fee returns.  In cases where it's already back, the outlook is more neutral, but still cautious ahead of next week's Fed announcement.

Econ Data / Events

  • 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)

  • Jobless Claims 884k vs 846k f'cast, 884k prev

  • Producer Prices (core, annual) 0.6 vs 0.3 f'cast, 0.3 prev

Market Movement Recap
08:12 AM

Treasuries rallied in the first half of the overnight session. Brexit-related headlines and anticipation for a reflationary tone in the ECB  Announcement pulled EU yields higher overnight.  US yields followed, bringing them back to slightly higher levels (up less than 1bp).  2.0 UMBS are down 1 tick (-0.03). 

12:57 PM

MBS-specific rally following Fed buying operation.  Sellers brought light supply... very light.  Treasury rally isn't hurting, but it's not the mover.  30yr bond auction up next.

01:03 PM

Decent 30yr bond auction, especially with minimal weakness in advance.  Yields came in right in line with the pre-auction expectations.  Bid-to-cover was slightly lower than average.  Yields are moving lower in response, but not aggressively. 

04:46 PM

Most of the post-auction gains are intact heading into the close.  Stock market weakness found a way back into the spotlight with heavy selling after 2pm.  Bonds had a head start thanks to a good auction response at 1pm.  MBS are 2 ticks higher (+0.06) and 10yr yields are 1.6bps lower.