Important Victory For Bonds, and Another Battle Ahead

Rates rallied today.  Despite a positive reaction to a strong 30yr bond auction, it looks like traders made their minds up to be buyers well before that.  The rally greatly improves the odds that 10yr yields are finding a supportive ceiling in the 1.1-1.2% zone.  The show of support is still a bit tentative to rest easy, but things certainly could have been worse over the past two days.  Some traders are still waiting to see what Biden has to say about stimulus tomorrow (and more importantly, whether they think moderate democrats will be in support).

Econ Data / Events
Market Movement Recap
08:10 AM

Fairly calm overnight session--especially in the context of recent volatility.  Stock futures dropped moderately around 530am with no response from bonds.  This adds some emphasis to resistance at 1.12% in 10yr yields.  MBS are opening 2 ticks higher(+0.06) in both 2.0 and 1.5 coupons.  Charts don't reflect that, visually, due to the roll.

11:25 AM

Bonds gained a bit more ground in the run up to the 30yr bond auction.  European bonds markets have largely been leading the charge and US bonds have been hesitant to follow at the same pace.  Now we're seeing 10yr yields shy away from challenging the 1.09 pivot point.  MBS are up an eighth of a point on the day and have also leveled off after rallying modestly in the past few hours.

01:07 PM

Moderate gains before and after the solid 30yr bond auction.  Both Treasuries and MBS at the day's best levels.  

04:19 PM

Bonds have been coasting sideways since the auction, and despite an initial rally, current levels are right in line with pre-auction levels.  This further supports the notion that traders more or less had their minds made up to start the day.  The question is how much of the move is attributable to new buying vs short covering.  We don't get a firm answer until we see how the next 2 days trade, but this move is the best case scenario for now.