Technicals And Fundamentals Join Forces to Deliver Warning For Rates

Whether we're talking about the week as a whole or simply today's trading session, bonds tried to convince us they were in good shape only to give up the gains and head back toward weaker levels.  MBS are outperforming, but the Treasury weakness got bad enough to pull everything higher in the rate world.  Next week's fundamental risks serve as an unpleasant compliment to today's technical failures in Treasuries.  

Econ Data / Events

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

  • Q3 advance GDP 33.1 vs 31.0 f'cast, -31.4

  • Jobless Claims 751k vs 775k f'cast, 791k prev

Market Movement Recap
08:55 AM

Limited reaction to the GDP number which showed the economy made it back to 86.7% of its strength at the end of 2019.  The ECB announcement hit 15 minutes later with all the typical bond buying promises you'd expect from any of the biggest central banks.  No major surprises on any front.  10yr yields perfectly unchanged and 2.0 UMBS up 3 ticks (0.09) at 103-09 (103.27)

11:34 AM

Green to red after European Central Bank press conference, but not because of it.  In fact, EU bonds have recovered while Treasury yields press to new highs of .816% (nothing is jumping off the screens at the moment when it comes to assigning blame).  MBS lost ground as well, but are significantly outperforming Treasuries day-over-day.  

01:03 PM

The Treasury losses leading up to the 7yr auction didn't take prices low enough to bring in the buyers.  The yield award ended up 1bp higher than the market expected.  As such, Treasuries are continuing to new high yields for the day with 10s up 4.4bps at .818%.  MBS are still outperforming (up just slightly in fact).

03:18 PM

Steepest losses of the day this afternoon.  7yr auction was the biggest cue for Treasuries, but there were other contributors (stronger stocks, corporate issuance, and perhaps even updated polling numbers).  MBS are outperforming mightily, down only 2 ticks (-0.06) despite 10yr yields being more than 6bps higher at .838.  That wasn't enough to stave off negative reprices, but at least it limits the damage.