Moderate Weakness; Decent Treasury Auction

7yr Treasury auctions haven't been great for the bond market in 2021, generally speaking.  Today's was an exception although it didn't necessarily provide a huge boost.  Yields were at the highs of the day, up more than 4bps at 1.625% just before the auction, but eased back under 1.61% after that.  The day's entire trading range was roughly 2bps (1.605-1.625) during the domestic hours.  This weakness is consistent with a technical bounce at 1.56% that began to take shape on Wednesday.  MBS underperformed at times but stabilized in the last 2 hours of the day.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Durable Goods -1.3 vs +0.7 f'cast
    Excluding defense/aircraft +2.3 vs 0.8

  • Jobless Claims 406 vs 425, 478 prev

  • Pending Home Sales 106.2 vs 111.1 prev

Market Movement Recap
08:51 AM

Bonds were moderately weaker in the overnight session with most of the move happening in the final 2 hours leading up to the domestic open.  European yields and risk assets (stocks) led the move. 830am econ data hasn't had an effect.  10yr is up 2.5bps at 1.606 and 2.5 UMBS are down 3 ticks (0.09).

01:02 PM

Weaker ahead of the 7yr auction, but recovering a bit since then on slightly stronger results.  It's not a runaway rally though.  10yr is up 3.5bps at 1.616 and 2.5 MBS are down 6 ticks (.19) at 103-17 (103.53).

02:51 PM

Bonds indeed found their footing after the 7yr auction although there hasn't been a big, obvious rally pushing back in the other direction--more of a sideways grind with no additional weakness.  10yr yields are up 3bps at 1.61% and 2.5 UMBS are still down 6 ticks.