Strong Move in Bonds Helps Balance The Outlook

After a month of almost exclusive weakness, extreme volatility in early Nov, and the weakest day we've seen in a long time on Monday, bonds were definitely on the defensive heading into Veterans Day.  There was a chance we were seeing 10yr yields indicate a willingness to use 0.96% as a ceiling on Tuesday and today's trading provided a big vote of confidence in that outlook.  10yr yields rallied incessantly throughout the day, regardless of data, news, or goings-on in other markets.  Even the 30yr bond auction failed to produce any of the typical auction day trading patterns.  While the gains aren't necessarily a final victory for bonds (far from it), they represent the first real, plausible effort to push back against bearish momentum from yields that are high enough to garner broader buy-in from bond traders.

Econ Data / Events

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

  • Jobless Claims 709k vs 735k f'cast, 757k prev

  • Core CPI Inflation (y/y) 1.6 vs 1.8 f'cast, 1.7 prev

Market Movement Recap
08:40 AM

After a rough futures session for yesterday, Treasuries are bouncing back today, again reinforcing technical ceilings at .96%.  Bonds gained ground  cautiously in early domestic trading with yields now down about 3bps at .93%.  MBS are 6 ticks (.19) higher to start the day.  No noticeable reaction to 8:30am econ data.

12:31 PM

Today is Treasuries' day to rally, apparently.  10yr yields are down 5.7bps to .903.  MBS are up 7 ticks (just under a quarter of a point) to 103-05 (103.16).  Fed Chair Powell is talking at a European banking conference and bonds seem to enjoy the tone, but it's not the key driver.  Key driver = timing and technicals.

03:32 PM

MBS squeezed higher in less liquid late-day trading.  Gains are still nowhere near those of Treasuries but 2.0 UMBS are nearly 3/8ths higher on the day.  Meanwhile, 10yr yields are down 8bps at .88%.