What’s Up With The Big Sell-Off in Bonds?

The omicron narrative is one reason being tossed around for today’s rather sharp bond market losses with the thesis being something to the effect of “sure, cases surged, but we expected that with the holiday reporting lag.” From there, additional reports on lower severity may have the market feeling a bit more optimistic.  Some traders cited news regarding a study about omicron’s role in achieving endemic status sooner than we would have with the delta variant.  Don’t jump on these bandwagons too quickly though.  We would have expected more participation in stocks if this were exclusively a covid-inspired move.  Rather, we can definitely continue to lean on the same old late-December observation about lighter participation greasing the skids for moves that wouldn’t otherwise be as big.

Econ Data / Events

Fed MBS Buying  10am, 11:30am, 1pm

Market Movement Recap

08:39 AM Initially flat overnight.  Slightly weaker in Europe.  Sharper weakness at 8:20am CME open.  10yr up 3bps at 1.515 and 2.5 UMBS down just under an eighth of a point.

11:09 AM Fairly steady weakness all morning with another little pop after oil inventory data.  10yr up almost 6bps and 2.5 UMBS down 5 ticks (0.16) at 102-00.

03:34 PM Additional weakness after 7yr Treasury auction, but it was short-lived.  MBS now down more than a quarter point and 10yr yield up 6.4bps at 1.548.
Source: Mortgage News Daily