Bearish Bond Trend Continues

Looking back at MBS or Treasuries over the past few weeks reveals a clear termination of a rally trend at the end of September and a similarly well-established bearish trend throughout October.  Treasury yields are the highest since early June and MBS aren't too far away from their weakest levels in months.  Stimulus prospects continue applying pressure, but we should also consider the same discussion we had at the end of September.  Simply put, sometimes momentum just runs the other direction with the start of a new month--especially if the previous month was moving almost exclusively in the other direction.

Econ Data / Events

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

  • Housing Starts 1.415m vs 1.457m f'cast, 1.388m prev

  • Building Permits 1.553m v 1.52m f'cast, 1.476m prev

Market Movement Recap
08:32 AM

Bonds opened flat to slightly stronger overnight, but lost ground steadily and modestly heading into the domestic session.  The net effect at the moment is a 10yr yield up just over 1bp at .786% and 2.0 UMBS down 1 tick (0.03) at 103-02 (103.06).  No major reaction to Housing Starts data.  There was a bit of selling just before that, possibly tied to a Trump stimulus headline.

12:18 PM

Modest weakness into the PM hours for MBS.  At first, broader bond market weakness led the way, but most recently, it was the Fed's latest buying operation in 30yr UMBS.  Oftentimes we'll see a change in tone for MBS immediately following those buying operations.  Today's move at 11:50am corresponds perfectly with the end of the buying operation.

12:36 PM

Upbeat stimulus headlines (Pelosi interview on Bloomberg) are adding emphasis to the bond market weakness.  10yr yields hit high at .7991.  UMBS hit lows at 102-29 (102.91).  Sellers have already backed off though, so it remains to be seen how much damage this leaves intact by the end of the day.