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Bond Markets Weaker Overnight, NFP Brings More Indecision
Posted to: Micro News
Friday, January 04, 2013 9:17 AM

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First of all, there's still hope. 10's and MBS are still grinding sideways and possibly slightly higher in price following NFP, and so far, supports have held at the lows. That said, things are still fairly ugly and ominous overall. Just as we haven't broken support, neither have we taken out any meaningful resistance. In fact, as of now, we're looking at an incredibly nasty inflection point bounce in 10yr yields between yesterday's high yields and this morning's lows--similar story for MBS which bottomed out around 103-31 yesterday and have gone no higher than 103-30 so far this morning. 10's inflection point is in the mid 1.91's.

Japan had been on New Years holiday break until last night. We'd hoped they'd come back in and be more supportive of recent weakness, but they simply got on board with the raining on bond markets' parade. Europe and London hurt even more, bringing 10yr yields all the way up to a staggering 1.97+.

We were already bouncing back some before NFP hit at 8:30am. There has been ample volatility following the as-expected release. It would have probably been more supportive if not for some strong-ish internals. Even so, as this update is being written, 10's and MBS are edging ever-closer to retesting the aforementioned inflection points after both gave us quite a scare moving to 1.962 and 103-18 respectively.

10's are now down to 1.929 and Fannie 3.0s up to their session highs at 103-30+, but it's hard to be overly optimistic. The overnight and morning price action thus far, is doing more to confirm a shift toward negative trends than a heroic romp back to stronger levels, despite the quantum of solace afforded by holding ground at AM lows and inching toward the inflection points. It's a long road ahead--uphill both way (in the snow maybe!)--if we're to meaningfully break back in to yesterday's ranges. Waiting and seeing... Not utterly defeated, but not overly hopeful.




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