Reasons For Both Hope and Caution

Today's 10yr auction was average, but that performance followed a mid-day bond rally.  In other words, the auction likely would have been stronger if not for that rally.  On one hand, it's encouraging to continue holding ground without a new, abrupt sell-off so far this week.  On the other hand, we really need to see a stronger commitment to rally before getting too hopeful.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Core CPI (y/y) 1.3 vs 1.4 f'cast, 1.4 prev

Market Movement Recap
08:45 AM

Weaker overnight, with Treasuries following European yields higher.  Nice little jolt of gains after the weaker CPI data, but that's mostly unwound now.  10yr yields up 2.3bps at 1.55% and 2.5 UMBS down just over an eighth at 103-06 (103.19).

10:35 AM

MBS have been mostly flat all morning while Treasuries rallied modestly into the 9:30am NYSE open.  A bit of a weaker bounce since then.  2.5 coupons at lowest liquid levels of the day, down 6 ticks (.19) at 103-05 (103.16).  10yr back up to 1.550% after being as low as 1.533%

01:08 PM

Decent 10yr auction.  See the update for more. Intraday gains mostly holding.  10yr down 1bp at 1.52% and UMBS 2.5 within 1 tick of turning green.

03:21 PM

Not bad, not stellar.  Rally stalled a bit and 10yr yields backed up to roughly unchanged levels for the 3pm CME close.  MBS just barely weaker on the day.  Pretty uneventful considering the possibilities.