Yields Give Up Early Lead But Remain Near 2-Week Lows

Today ended up being about as big of a roller coaster as we could expect in the absence of any significant data, events, or market movement.  In other words, there was only a 4bp trading range in 10yr yields during the day, but it felt like more was at stake at times.  Reason being, the morning hours were in the process of confirming a break below the 0.87+ technical level.  That would have been a nice little milestone after successfully defending the 1.0% ceiling last week, but sellers took control early.  Yields spiked after the 20yr Treasury auction, and then fell in the afternoon--finally paying some attention to stock market weakness.  Both MBS and Treasuries ultimately settled into ranges close to yesterday's best levels and thus close to the best levels in 2 weeks.  

Econ Data / Events

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

  • Housing Starts 1.53m vs 1.46m f'cast, 1.46m prev

  • Building Permits 1.545m vs 1.56m f'cast, 1.545m prev

Market Movement Recap
08:34 AM

Stocks and bonds extended the risk-averse trend during Asian market hours (i.e. lower stocks and yields) but reversed course during European hours.  Yields rose until 740am before the next shift in momentum.  Bonds have been gaining ground since then with 10yr yields now down 1.2bps at .85% and 2.0 UMBS up 2 ticks (0.06) at 103-20 (103.625).

10:51 AM

Sellers pounced on the early morning gains with little by way of provocation.  Gains reversed at 8:50am, but the biggest jolt of volume hit at 10am.  The latter coincided with a release about global debt levels from the IIF.  In general though, the weakness is easier to attribute to technical resistance and "rate lock selling" associated with corporate bond issuance (learn more about that HERE).  10yr now up half a bp and MBS down 0.06 (2 ticks). 

01:11 PM

Additional weakness for Treasuries after the 20yr bond auction (a bit weaker than expected).  10y yields now up 3bps to .891% .  MBS outperforming nicely, but still in the red.  UMBS 2.0 down 3 ticks (0.09) at 103-16 (103.5).

03:29 PM

Varying performances this afternoon in Treasuries vs MBS.  Treasuries found their footing shortly after the post-auction sell-off.  MBS had more of a delayed reaction and didn't lose any noticeable ground until 2pm.  Prices are now back in line with the lows of the day.  Weakness in the stock market has been little help.