Heavy Issuance Weighs on Bonds

We knew bonds would be skittish about Treasury auctions this week, but the defensiveness began early owing to a big glut of corporate bond offerings.  Amazon led the way, accounting for nearly $20bln of the rather epic $34+ bln on the day.  Those are numbers we only ever see when one big player is bringing one of the year's biggest bond offerings to the table.  How big is $34bln of investment grade debt if it hits all on one DAY?  The best way to answer that is to simply remember the Fed only adds $40bln of new MBS in an entire MONTH.  The damage was minimal, all things considered, with MBS only losing an eighth of a point as of 4pm ET and 10yr yields up 2bps to 1.60%.

Econ Data / Events
Market Movement Recap
08:42 AM

modestly weaker out of the gate in Asia, but bouncing back since then.  Treasuries now just slightly stronger and MBS up 3 ticks (0.09) at 104-04 (104.125).

12:23 PM

Nothing of note so far.  Several fed speakers, but none of their comments have been off the recently beaten path.  10yr yields and MBS both unchanged from last update

12:47 PM

Quick pop toward weaker levels just after the last update.  2 potential scapegoats: several new corporate bonds hit the market, and it's the end of the EU trading session.  10yr yields are now up 1.2 bps at 1.591% and MBS are unchanged (about an eighth of a point off the highs.

03:50 PM

Additional weakness throughout the afternoon with the best explanation being "issuance" (see today's huddle/video for more).  10yr up about 2.5bps and MBS down about an eighth of a point.