Bonds Lost Ground, But It Was Still Sort of a Victory

As the day began, bonds flirted with the idea of breaking into positive territory.  We’d hoped to see them merely hold steady–especially after the weaker consumer sentiment data, but it was not meant to be.  After a brief rally on the sentiment data, bond buyers were done for the day.  Yields followed stocks and oil higher (correlation not necessarily causality) into the afternoon.  On the bright side, yields remained under the 3.13% technical level and MBS flat-lined with only an eighth of a point of weakness.   All of the above is technically a victory considering it still leaves us in much better shape than the end of last week.

Econ Data / Events

Consumer Sentiment 50.0 vs 50.2 f’cast, 50.2 prev Inflation expectations:     1yr: 5.3 vs 5.4 prev     5yr: 3.1 vs 3.3 prev

New Home Sales 696k vs 588k f’cast, 629k prev

Market Movement Recap

09:39 AM Slightly weaker overnight on mixed EU econ data, but improving a bit during domestic trading.  10yr up only 0.4bps at 3.093 and MBS down only 3 ticks (.09) 

10:19 AM Initially stronger after the drop in consumer inflation expectations at 10am.  Treasuries trading in choppy pattern around unchanged levels.  MBS lagging due primarily to illiquidity.  10yr perfectly unchanged at this moment at 3.089 and MBS down 6 ticks (0.19) with the caveat being that there is a 9 tick gap between buyers and sellers. 

10:44 AM Quick burst of selling without any obvious motivation.  Bonds at weakest levels now with 10yr up 4bps at 3.13 and MBS down 3/8ths 

01:03 PM Fairly sideways after the selling mentioned in the last update.  Off the weakest levels with 10yr yields up 3.6bps at 3.124 and 4.5 UMBS down just under a quarter of a point.

04:21 PM Sideways-to-slightly weaker drift continues for Treasuries with 10s up 4.9bps at 3.138.  MBS have been more flat, currently down just over an eighth at 99-27 (99.84).  Notably, 10s were under the 3.13% technical level by the 3pm CME close. 
Source: Mortgage News Daily