Bonds Surge Into August Despite Headwinds

It was an interesting juxtaposition to see a Fed speaker talking about tapering being announced as early as September while bond yields hit the 3pm close at the lowest levels since February.  Headwinds are definitely present, whether we're talking about tapering risk or simply the selling opportunity presented by such low yields at a time when the economy may soon suggest a bounce.  But tailwinds remain because that suggestion has yet to be made.  

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • ISM Manufacturing 59.5 vs 60.9 f'cast, 60.6 prev
    "Prices Paid" drops by most since March 2020

Market Movement Recap
08:58 AM

Slightly stronger to start after a relatively flat overnight session.  Most of the gains have come in the first 90 minutes of the domestic session.  MBS up nearly an eighth and 10yr yields down 1.4bps to 1.212%

10:21 AM

Additional gains after weaker ISM data.  10yr down 4bps at 1.184 and MBS up 6 ticks (0.19).

01:22 PM

Rally snowballed into the noon hour with 10s bottoming out at 1.151 (now up to 1.17%).  MBS are trying to hold gains with 2.0 coupons up just under a quarter point.

03:26 PM

Just a bit weaker since the last update, but 10yr still 4.4bps lower on the day at 1.182.  MBS still 5 ticks (.16) higher at 102-06.