The Trend is Not Your Friend

October has been one of those unpleasant months where bonds have several reasons to weaken, few to rally, and where the market hasn't expressed any interest in departing from the logical baseline.  In other words, rates are supposed to be rising right now, but they need to be careful not to rise too quickly for a variety of reasons.  We're left with a slow motion train wreck of sorts.  We know what's happening, and we just have to sit and watch.  Could things change?  Certainly.  There are several reasons they might (even if not all of them are pleasant), but that's a "what if."  The logical baseline is an unfriendly trend.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Housing Starts 1.555 vs 1.620m f'cast, 1.580 prev
    Building Permits 1.589 vs 1.680 f'cast, 1.721 prev

Market Movement Recap
08:48 AM

Flat to slightly stronger in Asia, but then steadily weaker during European hours.  Slight additional selling in the US.  10yr up 1.3bps to 1.604 and 2.5 UMBS down 1 tick (0.03).

11:49 AM

Additional weakness in Treasuries as House tosses around idea of legislation that would let Treasury raise debt ceiling unilaterally.  10yr up 4bps to 1.63.  MBS not responding as much, down only 2 ticks (-0.06).

02:07 PM

Selling pressure began to ebb heading into the 1pm hour and the 1.64% ceiling remains intact for now (1.630% currently).  MBS are down only 1 tick now (-0.03).