Fighting Good Fight, Waiting on Fed Day

Coming off a fairly rough Friday at the end of last week, it's mildly reassuring to begin the new week with no additional damage.  But as has been the case for weeks, these resilient episodes are noticeably lacking in bullish confirmation (i.e. we're not selling off, but we're not rallying in any meaningful way).  The takeaway is simple: it's a rising rate environment until proven otherwise.  If one event has the power to change the trading tone in bonds this week, it's Wednesday's Fed Announcement for reasons discussed in the Day Ahead.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • NY Fed Manufacturing 17.4 vs 14.5 f'cast, 12.0 prev

Market Movement Recap
08:19 AM

Fairly flat overnight with initial weakness giving way to a rally in Europe.  Both were small.  Slightly better selling in the past hour.  10yr is perfectly unchanged at 1.625.  UMBS still finding liquidity, but are close enough to unchanged as well.

11:51 AM

Additional decent gains heading into the end of European session.  France's suspension of Astra Zeneca vaccine lines up with the rally, but tough to say if it's the source.  10yr yields now down almost 3 bps at 1.597.  UMBS 2.5 coupons up an eighth. 

01:06 PM

Giving up some of the gains after the EU bond market close.  Nothing too dramatic and MBS/Treasuries both still in modestly positive territory (UMBS + 0.06 and 10yr down 2bps to 1.604).

03:49 PM

Uneventful fizzle continues after the 3pm CME close.  Treasuries are 2bps lower on the day and UMBS 2.5 coupons are nearly unchanged.