Treasuries and MBS are at the weakest levels in exactly a month and a half. The time frame preceding the March FOMC Announcement saw markedly weaker levels though the important support came in around 2.14--just a bit higher than today's 2.121 high in 10yr yields. To make matters worse, today's losses followed a WEAKER reading on ISM Manufacturing.
That's exactly what we didn't want to see. It speaks to a trading community that is determined to sell and simply looking to avoid major barriers to those goals. It's not uncommon for traders to wait to sell until significant data passes in order to be sure it doesn't come in so much weaker than expected that it causes an unavoidable rally. Today's data apparently wasn't weak enough for that. If anything, it's the selling that's been unavoidable lately.
There's nothing left to say from an analytical standpoint. We're now simply witnessing the bearish scenario play out. For the record, that bearish scenario consisted of the following observations, which you're probably sick of hearing about by now:
- extra narrow range in April suggesting the next move will be a big one
- bonds had a tough time making new gains beyond the 1.84 inflection point for the entire month, suggesting the next move might be to bounce back in the other direction.
- European bond markets had their own technical bounce that I warned might be the catalyst for the domestic move (it was)
- and now today, we've seen the bearish short term scenario in that bonds sold off despite a weaker ISM (as cautioned against in the Day Ahead: "If ISM is weak, and bonds sell-off anyway, game over").
MBS | FNMA 3.0 101-15 : -0-13 | FNMA 3.5 104-18 : -0-10 | FNMA 4.0 106-24 : -0-06 |
Treasuries | 2 YR 0.5990 : +0.0240 | 10 YR 2.1140 : +0.0790 | 30 YR 2.8310 : +0.0870 |
Pricing as of 5/1/15 12:15PMEST |