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Bond Markets Lose Ground After Data; MBS Outperform
Posted to: Micro News
Thursday, September 26, 2013 9:02 AM
MBS began the morning in roughly similar territory to yesterday's latest levels. That followed an overnight session in Treasuries that was largely uneventful with highs and lows falling inside yesterday's range.
Selling began well before data, with Treasury yields moving higher from 6am. When the data arrived, stronger-than-expected Jobless Claims were the primary motivator to continue the selling trend. GDP was close enough to consensus to be read either way as far as short term trading motivations are concerned.
There are two potential silver linings to the weakness:
1. It has, thus far, affected Treasuries more than MBS. 10yr yields are more than halfway back to yesterday's highs whereas MBS prices are noticeably less than halfway back to yesterday's lows.
2. The overall magnitude of selling has been fairly minimal (even Treasuries remained contained inside yesterday's range) and may already be showing signs of support (bouncy ceiling potential at 2.656%).
Pending Home Sales at 10am is less relevant in terms of data but could have a slight impact. After that, auction-related flows will contribute to the afternoon momentum.
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