Bad Vibes Persist For Bonds and Rates

Bonds began the day in weaker shape, thus keeping the threat of an ongoing correction alive.  After a fairly sideways morning, MBS dropped more sharply in the afternoon.  Treasuries maintained a gentle, but clear selling trend throughout the day.  Moreover, yields easily broke up and over the 1.125% pivot point without a second though. Taken together, this is bad news for rates as it easily reinforces the negative short term trend we've been following. In turn, that negative short-term trend is part of a broader negative trend in the bigger picture. 

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • ADP Employment 174 vs 49 f'cast, -78 prev

  • ISM Services PMI 58.7 vs 56.8, highest in 2 yrs
    ISM Employment Index highest since Feb 2020

Market Movement Recap
08:33 AM

Strong corporate earnings and steady-to-stronger econ data in Europe conspired to push bond yields higher overnight.  This morning's ADP data is adding fuel to the fire.  10yr yields are pushing the 1.125% technical level (1.127% currently).  MBS are down about an eighth of a point.

10:26 AM

Weaker following ISM data (10yr hit highs of day at 1.1323), but they've been bouncing back since 10:20am as stocks slide.  Stimulus gridlock could be a factor.

01:57 PM

Choppy trading throughout the morning hours with a slight bias toward weaker levels.  MBS down an eighth and closer to the day's weakest levels.  10yr is up 3bps at 1.125%.  Stocks are up half a percent and near their highs of the day.

03:36 PM

Bonds have trickled back to the weakest levels of the day, but at a measured pace.  No major sources of inspiration here, but MBS seemed to struggle more after the Fed's final buying operation of the day (which ended at 1:20pm)