Bonds Come Up Short After Another Attempt to Re-Enter Previous Range

For a second straight day, 10yr yields had a solid opportunity to move back into the previous sub-0.72 range only to lose ground as the day progressed.  Compared to yesterday, today's game looked like a much easier win.  A covid surge in Europe and weaker stocks helped bonds overnight. Treasuries were ready to capitalize early in the day, but after the market found its footing, bonds sold off for the rest of the day.  We had the lead.  We blew it.  Game over.  As expected, MBS ran out of energy to outperform Treasuries and were eventually dragged into weaker territory as well.

Econ Data / Events

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

  • Philly Fed Index 32.3 vs 14.0 f'cast, 15.0 prev

  • Jobless Claims 898k vs 825k f'cast, 845k prev

  • Import Prices 0.3 vs 0.3

  • NY Fed Manufacturing 10.5 vs 15.0 f'cast, 17.0 prev

Market Movement Recap
08:48 AM

Bonds were much stronger overnight in a move led by a sharp rally in European bonds and reasonably strong selling pressure in global equities markets.  Key considerations include record covid numbers in Europe (new lockdowns), weaker earnings, stimulus delays, and snags in Brexit negotiations.  AM econ data did no damage.  10yr down over 3bps and MBS up 2 ticks (0.06).

01:29 PM

Strong intraday correlation between stocks and bonds, although10yr yields have been rising faster compared to stock prices--just turning negative on the day at .727%.  MBS are back in line with the lows of the day after successfully bouncing earlier this morning.  With most of the selling hitting between 9:30am and 10am, this can be viewed as bonds being ready to capitalize on additional stock weakness, not finding it, and then turning around to head back from whence they came.

03:38 PM

Treasury weakness has continued at a modest pace with yields inching up to another new intraday high (.739%).  MBS lost ground after the Fed's 2nd buying operation of the day (ended at 1:20pm) and are now 1 tick lower (-0.03) on the day and roughly an eighth of a point lower from lenders' rate sheet print times this morning.