Strong Auction No Match For Bond Bears

Today's 7yr auction was the biggest potential source of volatility for the bond market.  After it came out with relatively strong stats, we were treated to a logical rally.  Unfortunately, that rally was very small, very brief, and it occurred only after yields had already drifted up several bps on the day.  The net effect is an auction reaction that gets lost in the shuffle, easily overwhelmed by the broader bearish trend.  In the final hour, 10s are up 5bps at 1.68+ and MBS are down more than a quarter of a point.

Econ Data / Events

  • Fed MBS Buying 10am, 11:30am, 1pm

  • Markit PMI 
      - Manufacturing 59.1 vs 58.4 prev
      - Services 57.0 vs 58.7 prev

Market Movement Recap
09:13 AM

Bonds moved slightly weaker overnight with Europe leading the way.  10yr yield up 1.2 bps at 1.644 and MBS down 2 ticks (0.06).

11:57 AM

Quick, but fairly small move down to new lows for MBS.  2.5 coupons now at 101-28 (101.875) vs intraday highs of 102.    10yr yields in line with AM highs, up 3 bps at 1.662.

01:06 PM

Weakness in the run up to the auction, and a bit of a recovery afterward.  MBS still down on the day, but now only an eighth of a point versus nearly a quarter before the auction.

03:52 PM

Additional losses after the 3pm CME close.  10yr and MBS both at weakest levels.  No big, new market movers.