For days--and especially since last Friday--we've been increasingly worried that the 2-month bond rally was running out of steam and at risk of a reversal. The jury was technically out until all of our overhead ceilings were taken out. As of today, they are.
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20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)
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Core Consumer Prices (y/y) 1.6 vs 1.1 f'cast, 1.2 prev
Bonds were weaker overnight with most of the damage arriving with the European session and strength in equities markets (i.e. "risk-on" move). Weakness extending this morning with higher CPI not helping. 10yr up 4.6bps and UMBS 2.0 down a quarter point.
Modest recovery for bonds after bouncing off the 0.69% technical ceiling. 10s moved as low as .663 but are up 1bp since then. MBS rallied a solid 6 ticks (.19) from the lows, but have also pulled back (now only an eighth of a point off the lows). 3 hours until the 10yr auction. Conventional wisdom suggests additional strength is unlikely in that window (and possibly even a predisposition toward pre-auction weakness). Surging stocks aren't helping.
MBS outperforming significantly ahead of Treasury auction (suggests supply is weighing heavily on Treasuries). MBS at strongest levels of the day despite Treasuries at weakest levels.
MBS remain near highs, but Treasury yields are up from intraday lows (.673 vs .655 about an hour ago). Those intraday lows line up with yesterday's intraday highs, thus suggesting a new pivot point for the list. Stocks are soaring, with S&P futures up 1.55%.
MBS Market Alerts
