Forget the ECB; Taxes Saved Bonds Today

First off, bonds didn't really need "saving."  They were only modestly weaker to start the day and didn't lose too much more ground from there.  The first rally arrived after ECB Pres Lagarde finished her press conference, but it didn't last long.  Yields were at their highest levels just after 1pm when the latest iteration of 39% capital gains tax news made the rounds.  Stocks and bond yields instantly moved lower in unison with the 10yr almost getting back to intraday lows of 1.53%.  MBS are going out near their highs of the day with 2.0 and 2.5 coupons both up 2 to 3 ticks (0.06-0.09).

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Jobless Claims 547k vs 617k f'cast, 586k prev

  • Existing Home Sales 6.01 vs 6.19 f'cast, 6.24 prev
    Inventory 1.07m vs 1.03m prev

  • Leading Economic Indicators 1.3 vs 1.0 f'cast, -0.1 prev

Market Movement Recap
08:18 AM

Bonds were slightly stronger to start the overnight session, but sold off during European AM hours.  No drama, just linear positioning ahead of the ECB press conference.  10yr yields are up 1.4bps at 1.573 and 2.5 UMBS are down just under an eighth of a point.

10:08 AM

Bonds have been rallying after the ECB press conference concluded, and have added to gains just slightly in the past few minutes.  10yr yields down 1.4bps at 1.545 and 2.5 UMBS up 1 tick (+0.03).

11:43 AM

Gains reversed somewhat quickly in the 11am hour (started gradually in the 10am hour).  Potential culprits include a bounce in stocks, Treasury auction issuance confirmation at 11am, and an updated Fed WEI showing a strong growth outlook at 11:30am.  The KC Fed's manufacturing index also hit a record high (released around the same time, and yes, we're reaching for justification here...).  10yr is up 2.3bps at 1.582.  MBS are down an eighth from highs.

03:21 PM

As outlined in the most recent update, capital gains tax hike headlines sent stocks and bond yields lower.  They've been holding those gains ever since.  10yr yields are down 1 bp at 1.55%.  2.5 UMBS are up almost an eighth of a point now.