Stronger Data Proves No Match For The Sideways Grind

Bonds have done a good job of clearing hurdles of various sizes over the past 2 weeks.  Last week's inflation data presented the biggest recent risk, but this week's Fed Minutes also raised some concerns.  This morning's example came courtesy of a much stronger Markit Services PMI reading, but it was no match for the well-entrenched range trade in longer term yields.  10yr Treasuries briefly hit their highs of the day, but then settled in to the same sideways-to-slightly-stronger pattern seen yesterday afternoon.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Markit PMIs:
       Services          70.1 vs 64.5 f'cast
       Manufacturing  61.5 vs 60.2 f'cast

  • Existing Sales 5.85m vs 6.09m f'cast

Market Movement Recap
08:36 AM

sideways to slightly stronger overnight.  Uneventful volume and volatility.  Modest gains in Europe with a bit of spillover helping US 10s start 1bp lower at 1.618.  UMBS 2.5 up 2 ticks (0.06) at 103-15 (103.47).

10:16 AM

Markit's Services PMI did some damage to bonds, pushing 10yr yields back up to overnight highs (+0.6bps at 1.634).  No major reaction to slightly weaker Existing Home Sales as the assumption is that it's driven by an inventory crunch.

02:31 PM

Low volume/volatility persists with Treasuries roughly unchanged and MBS just a shade stronger.  Several Fed speakers on the circuit, but nothing notable and new.