Another Bad 7yr Auction Day, Even If We Can't Blame The Auction

Bonds were feeling a bit defensive ahead of today's 7yr auction, and rightfully so!  7yr auction days have been rough in 2021.  The past 3 examples were rough, in large part due to auction results themselves.  Today was a bit different.  The auction was actually decent.  Bonds ended up selling off for other reasons.  More details on those in today's video...

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • FHFA Home Prices 12.2 vs 12.1 prev
    Case Shiller Prices 11.9 vs 11.7 f'cast, 11.1 prev

  • Consumer Confidence 121.7 vs 113.0 f'cast, 109.0 prev

Market Movement Recap
08:31 AM

Mostly sideways but slightly weaker overnight.  Low volume/volatility.  No standout market movers.  10yr yields starting up 1.5bps at 1.583.  UMBS 2 ticks (-0.06) weaker at 103-16 (103.5).

12:11 PM

Definitely favoring weakness ahead of the 7yr auction--almost exclusively seen in Treasuries.  10yr yields are up 2.5bps at 1.593% and 2.5 UMBS are down 3 ticks (-0.09) at 103-15 (103.47).

01:05 PM

Nice, average results at 7yr auction, but only after a bit of AM bond market weakness helped soften prices.  Not much movement since then with 10yr at 1.597 and MBS staying flat in a range between 1 and 3 ticks (0.03 - 0.09) weaker on the day.

02:56 PM

Treasuries have weakened somewhat abruptly heading into the close with some traders citing a big corporate bond offering from Citi (why would that matter?).  There's also a technical consideration as 10yr yields moved quickly up to the 1.62% level.  Either way, MBS have avoided most, but not all of the drama with 2.5 coupons now down an eighth of a point on the day.