Supply Storm Weathered (Could Have Been Worse)

After yesterday's brisk sell-off in the bond market, today's 30yr bond auction was in a position to endorse the weakness or push back a bit.  While it wasn't heroic, if we had to pick from those two choices, the auction definitely did more to push back against yesterday's high yields.  10yr yields were more than 3bps lower at the 3pm close and MBS were an eighth of a point higher.  We'll need another day of ground-holding (or better) before getting more optimistic about holding this range, but today certainly could have been worse.  

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Producer Price Index (PPI, Inflation)
    MONTHLY: ..............0.7 vs 0.4 f'cast
    ANNUAL, CORE: ......4.1 vs 3.7 f'cast

  • Jobless Claims 473k vs 490k f'cast, 507k prev

Market Movement Recap
08:54 AM

little-changed overnight with modest strength in Asia and 2-way trading in Europe.  Early trading has been even-keeled despite the PPI beat.  10yr is down almost 1bp and MBS are up an eighth of a point.

12:16 PM

Steady gains in the run up to the 30yr bond auction.  10yr yields now down 3bps and MBS are up an eighth of a point (2.5 coupons).  Bullish lead-offs ahead of auctions are usually good news, but we'll reserve judgment until getting the results at 1:01:30 pm 

01:10 PM

Very small negative reaction to 30yr auction results, but already seeing  a resilient bounce.  10yr yields still down 2.5bps on the day at 1.668, and 2.5 UMBS up an eighth at 103-09 (103.28).