Heading into this week, we were hoping to see some consensus between the economic data and any "4th of July" effects on covid numbers. It seems that holiday-driven case counts are only starting to hit as of Friday. More importantly, markets seem to be taking it in stride (suggesting if it was obvious to us, it was obvious to traders). Add underwhelming data to the mix and this leaves us in an increasingly familiar holding pattern.
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20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)
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Housing Starts +17.3% vs +8.2% prev
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Building Permits +2.1% vs +14.1% prev
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Consumer Sentiment 73.2 vs 79.0 f'cast, 78.1 prev
Bonds improved modestly in relatively quiet overnight trading and despite gains in equities (give credit to positive earnings updates). 10yr yields fell roughly 1.5 bps and are trading just over 0.60% to start the morning. 2.0 UMBS are up 1 tick (0.03).
In a few blinks of an eye, 10yr yields have moved into negative territory--even if only slightly (+0.2bps at .62%). 2.0 UMBS are also just a hair into negative territory, but that's barely 2 ticks lower from the last update (not enough for negative reprice risk).
Bond yields spiking mildly after an IMF warning on runaway US debt levels. 10yr yields up nearly 1.5bps now and 2.0 UMBS down more than an eighth from AM highs.
A small amount of resilience but no major change after the mid-day weakness discussed in the last update. Bonds are on cruise control heading into the weekend after a very flat week overall.
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