Surprise Snowball Rally as Stocks Swoon Over Global Risks

When it comes to stocks vs bonds, pundits generally give too much credit to one side for movement in the other.  In fact, on days with big movement in both markets, it's not uncommon to see stock people blaming the bond market and bond people blaming the stock market.  In today's case, the bond rally wasn't even in the same league as the bond sell-off, and the latter was clearly the flag-bearer for a broad risk-off rally that offered solid support for bonds.  It remains to be seen how long the stock swoon continues as there is some disagreement about whether the Evergrande drama deserves as much credit as it received today.  Either way, bonds simply endured an in-range correction, and they remain more susceptible to Wednesday's Fed when it comes to volatility risks on the horizon.

Econ Data / Events
Market Movement Recap
08:47 AM

Bonds rally sharply as stocks tank on Evergrande contagion fears.  10yr down 4.5 bps to 1.318 and MBS up 6 ticks (.19).  S&P futures down almost 2%.

12:47 PM

After a modest AM correction, bonds have resumed the rally.  10yr yields are down 6.2bps at new lows of 1.301.  MBS aren't quite back to the highs, but have closed half the distance (up .19 vs highs of +.25 and lows of +.10).  Big selling in stocks is leading the way.

04:04 PM

Treasury yields bounced at their 1.30% technical level just after 1pm and are now back up to 1.316%.  MBS have also given up some gains in the past few hours with 2.0 coupons now back down to 101-02 (101.06), an eighth of a point higher vs Friday's close.