Bonds Improve, Led by Treasuries as Corporate Pipeline Clears

One of the key sources of motivation for rising rates in the past 2 days has been an active slate of new corporate bond issuance.  As the new deals are brought to market, one option for the banks that run the books is to sell Treasuries to hedge against rising rates during the issuance process.  Once the bonds are finally launched, that can result in those hedges being bought back.  This is one of the reasons Treasuries are rallying and outperforming MBS today.

Econ Data / Events

  • Fed MBS Buying 10am, 11:30am, 1pm

  • Housing Starts 1.52m vs 1.575m f'cast
    Building Permits 1.65m vs 1.638m f'cast

Market Movement Recap
08:39 AM

Calm, uneventful overnight session.  Light volume.  10yr unchanged at 1.64 and MBS unchanged at 102-05 (102.16).

12:57 PM

10yr yields now down 2.7bps on the day and MBS up just over an eighth of a point.  Corporate hedge buybacks are helping (what's this?)

03:47 PM

New lows for the day in Treasuries with 10yr yields down 4.6bos at 1.594.  MBS are lagging, but still up more than an eighths at 102-10 (102.31).